If you are getting the "increase in not found errors" warning in Webmaster Tools, here's how you can fix it. Just remember, ignoring 404's is only OK if you know the pages are gone and don't want Google to keep looking for them. If you WANT Google to find those pages, you need to look into why they are returning 404's. If 404's are causing you trouble, see the training I made about permalink related issues.
Note: 404's do not affect your SEO unless you are actively sending people to non-existent pages:
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AllynBeekman
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Thank you for making this clear, Nathaniell. I've generally ignored them, as you stated, when I knew the page was gone anyway, but I was never completely sure that was the right thing to do.