A keyword an advertiser specifically excludes from triggering their ad, preventing the ad from showing on searches containing that term, even if the term is otherwise related to the advertiser's targeted keywords.
Why it matters
Negative keywords prevent wasted spend on irrelevant traffic — for example, excluding "free" or "jobs" from a paid keyword list prevents an ad from showing to people searching for a free alternative or job openings, who are unlikely to convert as customers.
In a sentence
"We added 'free' as a negative keyword after noticing a lot of clicks from people clearly looking for a no-cost alternative, not a paid product."