Negative keywords allow you to filter out non-profitable traffic. Thus you can convert a neutral or loss making campaign to a profitable one. Negative keywords are only valid for your broad & phrase match type keywords. You can set it at campaign level or adgroup level. Here are the benefits of including negatives: 1) Make your campaigns profitable if they are loosing money or even more profitable if they are already doing good. 2) Increases your CTR, thus gives you a better Quality score leading to lower CPC How do You find negatives: 1) Run search query report - It's the best tool to discover what keywords were used when your ad was clicked. For example you can remove irrelevant words, double-meaning words or proper nouns that does not apply to what you are selling. 2) Search Assist tool - this is the tool that assists you when someone is typing in search box. If you see something does not apply to your site, include it as negative. 3) Google Analytics - this is a great free tool that will track what keywords were used for traffic to come to your site. Review them and remove the unnecessary ones. Just like 'normal' (positive) keywords, there are also match types for negatives - broad, phrase and exact.
Great overall guide! I've seen many people not using a single negative keyword and it really hurts their campaigns.
Another tip to find negative keywords - Instead of starting your campaign and start spending money on the keywords/traffic and waiting to check your reports to see what you should remove. If you use Google's adword keyword tool and start searching for your keywords, you will be able to see some irrelevant keywords right there that you can add in your negative list from the beginning. Here is an example of some keywords that could be considered negative: free how information review etc..
For content you should focus more on domains that are costing you and just add them to exclusion list at campaign level.