I'm genuinely curious what you're testing with that. Is the idea to see how their scale of fluency matches up with yours, or to see if--assuming they use a reasonably similar scale as you--their self-evaluation if is accurate? If it's the latter, I agree overconfidence is a shortcoming, but it seems odd to structure the interview around sussing that out, especially given that the candidate may be only artificially overconfident because they think that's good for interviews. It feels more like a "gotcha!" than a genuine attempt to determine the candidate's quality. If it's the former (finding out what the candidate thinks "really good at X" means), that sounds interesting, but I don't quite get it.
It actually doesn't matter what the goalposts are very much. I've seen it asked with explicit goalposts, but it didn't seem to change anything except readjusting the goalposts; you could still infer the intent. "1 is a complete newbie, 10 means you helped write or at least have memorized the specification" just means the real scale is now 3-8, and they'll pick from there, scale accordingly. That said, someone who asks gains a point right off, as it were.
It's intended to view their confidence. As someone else posted, the older they've gotten, the lower they'd score. That's because as they've gotten more experience, they've had more of those "...wow, this code someone else wrote is so much better than mine" and "Oh man, this code I wrote 6 months ago is -terrible-", etc.
Someone who says "I'm a ten!", it doesn't matter what they think the goalpost is, the are the best they can imagine, which either means they are great (hence seeing how they answer on the followup questions), or it means they aren't, but they've never seen better...which means they aren't out learning, be it from other devs they work with, open source code, whatever. Throw them some hard questions, see how they answer. If they do well, snap them up, as they're good and they know it; if they do poorly, you may want to pass (a lot of the worst performing candidates I've seen ranked themselves 8-10 in a technology).
Someone who says "I'm a 3 maybe" probably means they are passably fluent, but they haven't done much with it, and they recognize it. Feel them out some easy questions first, and expect that if you need them to use this language there will be some mentoring and/or time needed to get them up to speed, but they'll probably be willing to learn given that they applied, and recognize they don't know it well.
Someone who says "I'd like to think I'm an 8, but most days I probably code more at a 6" means they're probably quite good with that language, but also quite realistic, and have had experience with requirements changing, making hard decisions due to delivery dates, have worked with a lot of libraries and people and seen some who are better, some who are worse. Start with intermediate questions and go from there.
It has no direct bearing on passing/failing the interview, it's just used to set the tone and expectations of the interview. If we have multiple positions open, it might be taken in conjunction with how you do to determine what position is offered, as well.
