Who are they- Beta readers are people who review your work and give suggestions before you go to publishers, where there might be an editor who will do the same thing.
What's their purpose- To review your work and make it better. Most people can do this, but people you know(family/friends) might just say 'that's great' to make you feel good so factor that into their reviews. Beta reviewers can pass that because you (probably) don't know them and they (probably) don't know you and will give an honest, or at least very minimally sugar-coated, review.
How to choose- I don't know. I haven't found any good beta review sites but this question suggests a few options that might help. I have no experience with those sites so go at your own risk.
what do I do with negative results- It depends. If it's a short 'you suck!' or equivalent, ignore it. If they keep coming, then maybe you do need to reread and heavily modify your story. Plot is probably fine but the rest of everything might not be. If it's constructive criticism like 'maybe fix this, add some stuff here, and do that', then do that and see if you like it better. If overall it makes the story better then say thanks and add it to your story.