Why is $\sqrt{x^2}$ always $x$? This question has the potential to sound extremely stupid, but I've seen (and also used) countless times the idea that $\sqrt{x^2} = x$. However $x^2 = x\cdot x = (-x)\cdot(-x)$.
I know that when taking the square root of something we take both the positive and negative root. Yet when solving an equation and we're faced with $\sqrt{x^2y}$ we make it $x\sqrt{y}$. Why didn't we consider $(-x)\sqrt{y}$? Similarly, $\sqrt{x^3}$ is often changed to $x\sqrt{x}$ and not $(-x)\sqrt{-x}$ which would still give the same result if cubed? (I do understand that the latter is imaginary, but that shouldn't stop us from using it, should it?)

The symbol $\sqrt{\mathstrut\quad}$ is defined to denote the non-negative square root. In other words: $\sqrt{x}$ is the number $y$ such that $y\geq 0$ and $y^2=x$. The number $y$ is then called the radical of $x$. This is a matter of definition. We need to choose one of the two values to make $\sqrt{\mathstrut\quad}$ into a function, and we like positive numbers better.
If $y = \sqrt{x}$ then $y^2 = (-y)^2 = x$. So now, what if $y = \sqrt{x^2}$?  
Since $y \geq 0$ by definition, we have $y=x$ if $x\geq0$ or $y = -x$ if $x<0$. We write this as $y = |x|$ and say $y$ is the absolute value of $x$. 
Also note that if $x$ is positive, $\sqrt{-x}$ is not well defined even if you can still find a number $y$ such that $y^2=-x$. You have to be careful: the radical is only defined for non-negative numbers.
