Today google has launched a new tool for the webmasters that allows Webmasters to create custom 404 pages.
To get the widget, log-in to your Google Webmaster Tools and pick Tools -> “Enhance 404 pages” from the navigation. Now copy the code snippet you’ll get into your 404 template.

When a user clicks on a link to a page that’s no longer available on your site, your server returns a 404 (Page Not Found) error. Because generic messages can be frustrating to the user, we recommend creating a custom 404 page to provide more useful information about your site.
In addition, you can add the 404 widget to your custom 404 page. The 404 widget automatically provides users with helpful suggestions instead of error messages.
* It adds a search box for your site with appropriate search suggestions.
* It tries to provide alternatives to incorrect URLs.
This makes it easier for users to find the information they need (and makes it less likely that they’ll leave your site to look elsewhere.)
Example
If a user types in the incorrect url http://www.example.com/news/recentt we’ll display the following:

















