First of, 404 traffic is
" The 404 or Not Found error message is an HTTP standard response code indicating that the client was able to communicate with the server but either the server could not find what was requested, or it was configured not to fulfill the request and did not reveal the reason why "
That means that 1. a page was moved, renamed or deleted, but there are still links on pages that people are clicking. 2. the URL was truncated but has enough of the URL to get to your domain. 3. And this is Quite common, the Surfer is stripping the URL trying to find either free photos, or an unprotected directory.
What to do with this traffic. Well most people just let it go. Sadly that's a mistake. Believe it or not, that traffic can be converted and that money is money you did not have. SO. here is an idea .
First off, if you don't have a .htaccess file on your server you should.
Open a note pad and use something like this
ErrorDocument 404
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 401
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 500
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 408
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 403
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 503
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
ErrorDocument 504
http://secure.allelitepass.com/track/Mzg1MjoyNjoyMw/
( Replace the URLs above with your REF url )
Then save it on your hard drive as .htaccess It will most likely look a bit like a note pad doc with no name showing and that's fine. Now FTP that to the root of your domain on your host. Just to make sure its working, go to your url and type something that could NOT exist on your server like this.
http://www.yourdomain.com/1290/index.phtdmsl
That will 404 and SHOULD be redirected to the site that you have places in the error doc lines. Now you will see some INSANE stats on that so you might want to make sure to use a campaign so you can track it, and don't expect to see a sale with anything Less than about 1:30 to 40k. It might not even be that good, But even 1 sale, is 1 sale.
There are other places to send your 404 and you might make some money. I personally dont have the time to track them down, but you may want to spend the time doing so. in the mean time, send it to any affiliate program that will accept it.
there are better examples and explanations of 404 and htaccess if you google them you will find a lot more info.
Be creative, think outside the box and you might surprise yourself with some nice extra cash.