After a bit of jamming on the guitar, do you ever feel like the skin on your fretting hand has been through a bit of a rough treatment, like the guitar is shredding you instead of the other way around? If so, then read onward...

See, I'm not talking about the regular numbness of the fingertips that the strings might give you after a while, 'cos that is perfectly normal. What I'm talking of here is busted base or middle segments of the fingers, for me, primarily of the index finger and the thumb.
Red marks the ouch!

As you might have guessed, these problems are caused by the fret bars. These are either a tad too long for the neck; thus pointing out, from the fretboard. Or, they simply have too sharp edges, and are hence not bevelled properly. Or both those, as in my case.

Either case, you'll need to do some fret work. This solution is quite simple and straight forward, but needs careful judgement and a bit of time spent.

What's needed

Well, for starters, it's really nothing too fancy, as you can see here:
  • Masking tape - must not be too sticky, should never leave any glue or stickiness to the surface it's applied onto!
  • Regular plastic tape - which is a bit more resistant to the file than the paper tape used for masking.
  • A diamond file - preferably a slightly rounded model. You should be able to pick up an entire set for just a couple of quid...or bucks, or whatever your currency is. ;^)

This is how I prefer to do it:

First off, I like to give the file some room to work on. By giving the E string (either the high or the low one, depending on what edge of the fret you're planning to work on) a little slack, I move it away from the edge, placing it in the next slot of the nut, as displayed below. That way I can work with the frets while keeping the strings on.

Next up, put masking tape around the annoying fret bar, covering all wood around the fret. Again, make sure the tape you use here do NOT leave any stickiness on the surface it's being applied to!

As the masking tape is made out of thin paper, we're going to need something a little more file resistant. I therefore choose to put extra layers of regular plastic tape on top of the masked areas, right next to the fret at hand.

When you're done covering up the surrounding wood, take your semi-round diamond file and align it with the fret bar itself. Then carefully file the edge of the fret as shown below, using both hands for better control (ie: hold both the handle and the tip of the file while filing).
Note: You should hold the other end of the file as well.
This picture is only for demonstration of the motion used for filing!

When you [think] you are done filing, remove the tape, feel the fret and see if it's soft enough. If not, just give it another go with the file. If top edges are a little sharp, you can always just do some fine additional filing with an even thinner file, to get the feel of the fret bar just right for your preference.
Here one can quite clearly see the difference between the sharp and the bevelled frets.
Do some slides with your finger across the frets' edges and make sure they don't cling onto your skin or leave any discomfort.
Don't forget to do this on both sides of the fret bars, especially if you have this problem with yout thumb as well. Then you're definitely going to have to file the edges close to your low E as well.

Good luck, and happy shredding (of the guitar - rather than your hands, that is)!