aakk9999 - 9:13 pm on Oct 24, 2012 (gmt 0)
If you have 121000 internal links on your site that return 404 Not Found then this is a sign of bad quality. You need to find out where these links are on your site and then figure out who (which script) is creating them. Then you need to correct this so that either links point to the correct URL or that links are removed.
If however there are 121000 URLs not found, but when you crawl your site, these URLs are not found anywhere within your own source code, then this is not a problem.
There could be that at some point you were generating such malformed links owing to some problem but the problem has been fixed since. Google might have picked them up in a meantime and will be re-trying them periodically. You could declare them as "fixed" in WMT and see whether they re-appear in reporting and if so, at what rate. You can then view the information "linked from" for some of these links to see where Google managed to find them again from (your site or external).