After you check out Google's linking guidelines as phranque suggests, I recommend that you view both of the videos that Jim Boykin has posted about using the tool. They're below the fold on the same page the tool is on.... Google Backlink Checker Tool for Penguin & Disavow Analysis http://backlinks.webmasterworld.com/google-backlink-tool-penguin-disavow/
Jim's videos are among the best guides I've seen for systematically identifying bad backlinks, but they assume a certain level of knowledge. The tool helps you to identify patterns of link properties that might signify bad and artificial links.
If the videos don't make sense to you... ie, if you don't understand the significance of the link properties and patterns Jim mentions in the video... then you have a pretty big learning curve before you start disavowing links. There's no one pushbutton answer to cover all sites and backlink acquisition patterns. And, as Google warns, the disavow tool can be dangerous if you don't know what you're doing.
I would also check out all the links from the backlinks tool page for information provided, including The Crack Backlinks Checker Tool
...] also in beta, which should help with sort out the dead and live links.
After viewing the videos and reading support material, post questions here, so members can get a sense of how to provide further guidance.