My iPhone battery indicator isn't working correctly?

angel

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What does it mean when my battery drains fast and when I ran an app it crashes whenever my battery indicator goes halfway. Then it reboots but indicator now shows red. When I charge it, it goes from 10% to 73% within a few seconds, then it charges normally thereafter.

I have an iPhone 3g. It works fine if its plugged to the wall charger, apps won't crash. Anyway is this a hardware problem? Does the battery need to be replaced? Or is it a software/ app conflict?

Thanks in advance
 
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