Denial can be used two ways.
1) Deny God's truth and replace it with lies.
2) Deny lies and replace it with God's truth.
One defends the ego and makes God unreal. The other defends God and makes the ego unreal.
Denial of God has progressed very far and is responsible for everything that happens in this world.
Denial of ego is the only way to resurrect and return to safety.
Sometimes, denial is combined with level confusion. When this happens, you use denial incorrectly in the name of thinking that it's making you more spiritual, but instead it's increasing separation.
Denial of the body for example could go one of two ways. You could deny that it is real, which is correct, if done as a recognition that it is unreal and not as an attack on it seeming to be real.
Or, you could be believing the body is real and attempt to PRETEND it is not there, by using denial to attack it to try to make it go away. This will separate you from it and produce sickness, instead of transcending it.
In other words, denial needs to be used honestly and with clarity. If you are "in denial" about how you are using denial, that can be a problem.
Proper use of denial will entail a clear RECOGNITION of what something IS, without avoiding it or pretending to make it into something it is NOT.
Clear perception of what the ego is, what the body is, what illusions are, is all that is needed in order to "deny the ego". MISTAKEN perception will lead to the improper use of denial, because it means you see the ego as real instead of an illusion, and will then use denial to fight with it to try to make it go away.