ITS or IT'S - here's (or here is) the gen:

ITS (OR IT'S?): PUBLIC ENEMY NUMBER 1 - by Patricia T. O'Conner

(http://www.writingclasses.com/Products/PubsDetail.php/publicationID/80)


What a difference an apostrophe makes. Every possessive has one, right? Well, not necessarily so. It (like he and she) is a pronoun—a stand-in for a noun—and pronouns don’t have apostrophes when they’re possessives: His coat is too loud because of its color, but hers is too mousy.
Now, as for it’s (the one with the punctuation), the apostrophe stands for something that has been removed. It’s is short for it is, and the apostrophe replaces the missing i in is. The parakeet is screeching because it’s time to feed him.
Here’s how to keep its and it’s straight:

• If the word you want could be replaced by it is, use it’s. If not, use its. (There’s more on its and it’s in the chapter on pronouns.)

NOTE: Sometimes it’s is short for it has, as in: It’s been hours since he ate.

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This is so simple to understand but apparently so difficult to apply. I think I hate a wrongly used it's even more than their for there.