404 errors and a site's performance

[denverdonate]

I was reading through the Google Webmaster documents and there was something about 404 errors and it didn't seem like what I remember. The document (page) noted that 404 errors don't generally hurt a website but the people coming to your website and getting the 404 has more to do with it.

Is this real? Or am I understanding this wrong?

A long time ago Google took into account the entire website and now ranks page-by-page more independently is this why?

 

[JohnWeb]

I would say 404 errors don't hurt a website. Create helpful redirects for your real human visitors.

 

[arindamb]

If you don't create redirections for 404 error pages or remove them on your web pages then it will hurt your SEO site.