Its is the possessive form of "it." It's (with an apostrophe) is always short for "it is" (it's so fun) or "it has" (it's been nice knowing you). But, you might ask, don't apostrophes show possession, as in "teacher's pet"? Well, yes they do, but not necessarily with pronouns. Often an apostrophe is used to show a contraction, like in it's or ... More @Wikipedia
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