It is used to remove bad links and dead backlinks of your site and used to fix broken links

Google’s link disavowal tool allows publishers to tell Google that they don’t want certain links from external sites to be considered as part of Google’s system of counting links to rank web sites. Some sites want to do this because they’ve purchased links, a violation of Google’s policies, and may suffer a penalty if they can’t get the links removed. Other sites may want to remove links gained from participating in bad link networks or for other reasons. The disavow links tool launched in October 2012

If you have links that appear to be spammy then you can use googles disavow tool to remove them.