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Or is it capped to 100? If it is, is there a point to go below 0 armor?

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Any time you manage to reduce an opponent's armor to below 0, physical damage will be amplified. There exists a simple formula for the damage multiplier:
damage multiplier = 2 - 100 / (100 - armor) [​1]

For example, at -100 armor, the damage multiplier is 2 - 100 / (100 - (-100)) = 2 - 100 / 200 =1.5x. Therefore, an auto attack with 100 AD against a target with -100 armor (and without the relevant defensive masteries) will do 1.5 * 100 =150 damage.

Theoretically, as you reduce an opponent's armor more and more, you will approach a 2x damage multiplier. In practice, however, you will rarely see enemies with less than -30 armor, which gives a 1.23x damage multiplier.

As Hackworth mentioned, it is also possible to have negative magic resistance. (For instance, super minions have -30 base MR.) Magic resistance uses the same formula as armor for calculating damage multiplier.

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Yes, negative armor/magic resistance can happen and will have the same effect as positive armor/mr, except it increases damage. For example, 100 armor halves physical damage, -100 would double it.

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