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The creature is also treated as one level lower for the purpose of level-dependent variables (such as spellcasting) for each negative level possessed. Spellcasters do not lose any prepared spells or slots as a result of negative levels.
So how do negative levels actually affect spellcasters?
Ok, just a friendly reminder but a search of the forums could have answered this without having another thread.
That said --
lets say you are a level 10 wizard -- you take 3 negative levels from an enervation spell.
Until those wear off:
You can still cast 5th level and lower spells, but when you do so you treat your caster level as 7 instead of 10.
As such if you were to cast cone of cold for example it would do 7d6 damage instead of 10d6 and your spell resistance check would be +7 instead of +10.
This really does need to FAQ'ed big time.. this question is asked a lot.