Recently Google has released its own disavow links tool. Earlier Bing has released its own tool to remove spam Backlinks.
Google Disavow links is very effective to deal with Google’s Penguin Update. If your blog lost the ranking in Google due to recent Google penguin updates then you should use this tool to report Google the spam Backlinks pointing to your blog.
How To Use Google Disavow Tool:
Google Disavow Tool can be accessed from here.
You need to create text file that include the spam Backlinks to your blog. If you want to ignore all the links from single domain then you can write domain: xyz.com. It will remove all the links pointing to your blog from that domain.
After creation of text file you need to upload it. You can update this file anytime by going above URL.
Google will take 2-3 week to reIndex your pages. This tool is still in beta version and there may be big improvement in this tool in future.
I strongly suggest you use this tool if you see any sudden decrease in your blog’s traffic.