The reason this has become the most common representation for signed numbers in computer hardware is that it makes the difference between signed and unsigned numbers basically irrelevant as far as the hardware is concerned. When the difference does matter (which it does in division, conversions between different word sizes, conversions to/from text, and sometimes multiplication), there are two different instructions for signed and unsigned, and it's up to the programmer or compiler to pick the right one.
This is only true if the size of your modulus is fixed. In fact, there is a "sign extension" command allowing you to produce, for example, signed 128-bit values from signed 64-bit values, and this basically requires interpreting two's complement values the same way they represent themselves: a three-bit -1 is just the sum of the positive values +1, +2, and +4. To extend that to six bits, you add the positive values +8, +16, and +32.
The meaning of the high bit in our six-bit scheme shouldn't be viewed as "when this bit is set, subtract 32 from the value instead of adding it". It is "whether this bit is set or not, all higher bits in the number, the ones that don't exist in the hardware, are equal to it"; under this interpretation, the 8-, 16-, and 32- bits were already set in the three-bit value, and that's why they continue to be set when we do a sign extension.
Every place value is still positive, but as long as there is no highest set bit, the number itself will be negative, and equal to the value you'd calculate from its representation as a geometric series.
The modern version is two's complement. It still has a sign bit, but negating a number involves more than just changing the sign bit since the representation is modular.
If x had type unsigned int, this wouldn't introduce undefined behaviour.
0000 is 0
0001 is 1
0010 is 2
0011 is 3
0100 is 4
0101 is 5
0110 is 6
0111 is 7
1111 is -1
1110 is -2
1101 is -3
1100 is -4
1011 is -5
1010 is -6
1001 is -7
1000 is -8
The highest bit is always 1 when the sign is negative.