What must occur when Mode C altitude is not valid?

When Mode C altitude is not valid, designating Field C as vacant is correct because it indicates that the altitude information transmitted from the aircraft's transponder is unreliable or cannot be determined. In air traffic control, valid altitude data is crucial for maintaining safe separation between aircraft and ensuring proper navigation. Therefore, when the Mode C altitude does not provide reliable data, marking Field C as vacant informs controllers that they cannot rely on that altitude for flight operations. This action helps to avoid potential conflicts or misunderstandings regarding an aircraft's altitude.

The other options suggest actions that might not directly address the primary need for accurate altitude information. For instance, marking the field as ambiguous or notifying the flight crew may be relevant in specific situations but do not address the immediate requirement to manage unreliable altitude data. Adjusting operational parameters may also be necessary in broader contexts, but the primary step is to clearly indicate that the altitude data in Field C is not valid.