Use "its" when you are indicating possession, such as "The cat licked its paw." Use "it's" when you are using a contraction for "it is" or "it has", such as "It's a sunny day" or "It's been a long week."
A good way to remember the difference is to think of "its" as similar to "his" or "her" - they are possessive pronouns without apostrophes. "It's" is a contraction, just like "it is" or "it has."
Context matters in English because the meaning of words can vary based on the surrounding words, phrases, or situation. Words often have multiple meanings, and the intended sense becomes clear through the context in which they are used.
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