Its and it's

Lots of people confuse its and it's, possibly because they are taught these around the same time as they are learning about the apostrophes (the ' sign) used to show possession (e.g., John's bike) and it all gets mixed up.

When we speak, there's no problem with its and it's because they sound the same and the context makes it clear what we mean. In writing, however, we need to show which we mean. (Strictly speaking, the context makes it clear in writing too, but if your reader has to stop and think about whether you mean its or it's — which might well happen if you're not clear about how they work and are not consistent in using them — it disrupts the flow and breaks the link between you and your audience.)

In written English, an apostrophe marks a place where something has been taken out of a word or phrase: the new, shortened word is called a contraction. We use these all the time, for instance when we say can't and doesn't: can't is short for cannot, and doesn't comes from does not. You could use either form in the same sentence:

I can't come out on Friday or I cannot come out on Friday.

He doesn't eat salad or He does not eat salad.

The apostrophe replaces the letter (and, of course, the space) omitted when two words are merged into one contraction. These kinds of contractions are easy to deal with because they can only mean one thing.

Sometimes the same contraction abbreviates different phrases, but the context shows what is being shortened:

What's the problem? or What is the problem?

What's happened? or What has happened.

So: its or it's?

If you remember that apostrophes replace something that's missing, you can easily solve the problem of its and it's by expanding the contraction to check whether you've used the right one:
 

• It's sunny today. This means It is sunny today and the contraction needs an apostrophe: It is → it's
• It's been sunny today. This means It has been sunny today and the contraction needs an apostrophe: It has → it's

That is how it's is used. Now for its:

• The dog chews its squeaky toy makes no sense at all if you turn it into The dog chews it is squeaky toy. Nothing is missing and its, without any apostrophe, is right.

That's all there is to it. You can use the same method with other words, for example to distinguish between your and you're:

 

• You're cheerful. This is short for You are cheerful and the contraction needs an apostrophe: You are → you're
• Your book, is it? To say You are book, is it? would be nonsense. Nothing is missing, no apostrophe is needed: the your is correct.