How Does Search Engine Distinguish Brand from Keyword?

In regards to inbound ratios, branded anchor text is considered natural but exact match anchor text is considered suspicious. But how does the algorithm distinguish a brand from a keyword? Especially in cases where the website's brand name is also a keyword that other websites are trying to rank for.

Does it just go by domain name? Meaning freecandy.com should have more natural anchors of "free candy" but candyfacts.com should have far less if any?