In google adwords you are able to create a negative match keyword and associate it with your google campaign or your adgroup.
As an example, say you are selling “power transformers” and are bidding on the keyword “transformers”. In this case, you will be getting lots of matches for people doing searches for the toy robots.
Therefore you will want to use a negative match keyword such as “toys”, “robots” and “games” , etc.
Developing a negative match keyword list will have a positive effect on your click thru rates, google will make more money and they will reward you with lower bid prices.
Google uses the example of tennis shoes here:
If your keyword is tennis shoes and you add the negative keyword -red, your ad will not appear when a user searches on red tennis shoes. Negative keywords are especially useful if your account contains lots of broad-matched keywords. It’s a good idea to add any irrelevant keyword variations you see in a Search Query Performance Report or the Keyword Tool as a negative keyword.
One strategy is to put negative match keywords into an adgroup and split test the adgroup against a similar one without the negative matching thereby verifying if CTR has been improved.
Improving your CTR or Click Through Rate is essential part of lower your bid price and keeping your Return On Investment high.
Redfly Marketing has a great post about how to find negative keywords
SoftwareProjects.com had a good post about negative keywords http://www.softwareprojects.com/resources/traffic-attract-customers/t-ppc-negative-keywords-1496.html
Google explains it here:
as does Lorelle Smith
And another link from Jennifer Slegg