Google recently announced a new tool webmasters can use to fight spam or to clean up after a bad SEO campaign. It's called the Disavow Link Tool.
But this tool does come with a warning.
Google's head of webspam team, Matt Cutts, said that most webmasters will not have a use for the tool. For instance, if you run a Mom & Pop shop and do your own SEO, you may not need it, especially if you religiously follow Google's webmaster guidelines. However, if you are a small business that hired an SEO firm to manage your search engine optimization and found out later that the SEO company used questionable tactics that you weren't aware of and didn't approve, then the Disavow Link Tool might be very important to you.
That happens more often than any of us would like to admit.
If that has happened to you, be sure that you do everything you can to remove bad inbound links to your website before you use this tool. One of the things you have to do is upload a Disavow.txt document, and in that document you have to tell Google what you have done to remove bad links. It's possible that Google will ignore your request if they feel like you haven't done enough on your own to remove those links.
It is becoming increasingly more common that bad inbound links will hurt search engine rankings. That increases the importance of the Disavow Link tool. Even still, webmasters should think twice before rushing to use the tool because you can harm yourself worse by using it the wrong way. At least, that's what Matt Cutts says, and who am I to argue?