404 ideal handling

[ganeshgrowth]

What is the ideal way of handling a 404 error. What are the best practices?

[phranque]

make sure the http response header includes a 404 Not Found response code!

almost a year ago was 404 week on the GWT blog:
Official Google Webmaster Central Blog: It's 404 week at Webmaster Central [googlewebmastercentral.blogspot.com]
Official Google Webmaster Central Blog: Farewell to soft 404s [googlewebmastercentral.blogspot.com]
Official Google Webmaster Central Blog: More on 404 [googlewebmastercentral.blogspot.com]
Make your 404 pages more useful [googlewebmastercentral.blogspot.com]

[phranque]

Can Google Verify 404 through a 301 Redirect? [webmasterworld.com]