She explains that if you are using a negative keyword like -fast blue, any keyword iteration that utilizes both words will not show up, including terms like "blue fast". Essentially, consider an "AND" operation. Therefore, if you use a key phrase like "fast car mercedes," and there's no mention of "blue," an ad will show. But with the inclusion of "fast car mercedes blue," the ad will not show because both terms are included in the negative keyword.
On the other hand, if you had a negative keyword like "-fast blue", which is a negative phrase match, you won't get ads that show "fast blue" in the actual keyword list. But if you had an ad like "fast green blue", it would show up.
Sarah goes through examples for negative exact match also.
Understanding negative keywords and how they are applied in different scenarios should help you get an understanding of how to maximize your campaign and make sure to generate the most targeted impressions.
Forum discussion continues at Google Groups.