I'm currently working through my Webmaster Tools account to clean up our 404s, and I've noticed something very strange.
It appears to be reporting cited links to broken URLs within my 404 report. For example if www.somedomain.com mentions my domain (without a link), but mentions an invalid URL (i.e. www.mydomain.com/invalidURL), then that page shows up in my 404 report, and under Linked From it shows www.somedomain.com.
So it's like Google is crawling citations, and kinda like it's treating them like links, although www.somedomain.com doesn't show up in the link report in Webmaster Tools.
It's probably a scraper scraping www.somedomain.com, converting the text-only URL-looking string into html and thus creating a link to an invalid URL on your site. Feed that bad URL to Google, see if it comes up with the link to the scraper's site. in any event, you can't really do anything about it and it's probably best to just ignore it - it's not supposed to hurt your site.