I am just utterly confused regarding number systems and the internet articles/searches haven't helped me so far.
Consider this number $123_{10}$ in base-10. Now it is fairly easy to understand that this $123_{10}$ actually is a shorthand form which translates to: $$1*10^2+2*10^1+3*10^0$$ which is basically nothing but multiplying each digit with its place value.
But let's now consider a number $123_{8}$ which, as with the base-10, actually should translate to $$1*8^2+2*8^1+3*8^0$$
Now firstly, why does evaluating octal numbers like this yield its decimal equivalent? Evaluating any base number like this, why does it yield its decimal equivalent? Isn't it just supposed to be a way to expand the shorthand way that we normally write the numbers in.
Writing this, another thing comes to mind, when we expand base-8, we are multiplying it with exponents of 8, which isn't even a digit in octal system. And then again, the exponents? What number system they belong to?
Only because we are used to doing computations in decimal. Someone (or a society) adept at doing computations in hexadecimal could use the same expansion to convert $123_8$ to hexadecimal:
$$ \begin{align} 1 \cdot 8^2 + 2 \cdot 8^1 + 3 \cdot 8^0 &= 1 \cdot 40 + 2 \cdot 8 + 3 \cdot 1 \\ &= 40 + 10 + 3 \\ &= 53 \end{align} $$
$53$ is the hexadecimal form of $123_8$. This works because all the computations, e.g., $2 \cdot 8 = 10$, are done in hexadecimal. The only reason you get the decimal form $83$ from this computation is because you do the computation in decimal.
This is true! This is a good hint that the computation is actually being done in decimal, as I noted above. In octal, the $8$ would be replaced by $10$, and the computation would look like this:
$$ \begin{align} 1 \cdot 10^2 + 2 \cdot 10^1 + 3 \cdot 10^0 &= 1 \cdot 100 + 2 \cdot 10 + 3 \cdot 1 \\ &= 100 + 20 + 3 \\ &= 123 \end{align} $$
This computation confirms the tautology that the octal $123$ has the form $123$ in octal.
All the writing systems describe the same numbers -- they are just different ways of writing them. The exponents belong to the common system of numbers. How you write them is up to you; usually you'll write them the same way you write the bases, so if your computation is in decimal, you'll write the exponents in decimal; if your computation is in hexadecimal, you'll write the exponents in hexadecimal; etc.