What is a "good Sunnah" (Sunnah Ḥasanah), and how can it be distinguished from innovation (bidʻah)?

The word "Sunnah" (السنة) means "way" or "method." A "good Sunnah" (السنة الحسنة) is a way that is legislated [by Islamic law]. Some believe in the existence of "good innovation" (بدعة حسنة) and "bad innovation" (بدعة سيئة), citing the hadith: "Whoever introduces a good Sunnah in Islam..." However, this is a misunderstanding of the hadith because it contradicts the saying of the Prophet, peace and blessings be upon him: "Every innovation is a misguidance, and every misguidance is in the Hellfire." The word "every" (كل) indicates the generality of misguidance in all innovations. Furthermore, the meaning of "Sunnah" is "way," and a good way is that which conforms to the Sharia, while a bad way is that which contradicts it. The reason for the narration of that hadith was related to a charity initiated by a companion, which encourages the revival of existing Sunnahs, not the invention of new innovations.