Two's complement is a method for representing signed integers in binary form. It allows computers to perform arithmetic operations on both positive and negative numbers using the same binary addition process. In this system, the most significant bit (MSB) indicates the sign: 0 for positive and 1 for negative. To find the two's complement of a binary number, you invert all the bits and then add 1 to the least significant bit (LSB). For example, the two's complement of the binary number 0101 (which is 5 in decimal) is 1011, representing -5. This method simplifies calculations and is widely used in computer systems.