From my Eats, Shoots & Leaves page-a-day calendar:
The confusion of the possessive "its" (no apostrophe) with the contractive "it's" (with apostrophe) is an unequivocal signal of illiteracy and sets off a simple Pavlovian "kill" response in the average stickler.
ETA (from the next day's page): The rule is: the word "it's" (with apostrophe) stands for "it is" or "it has". If the word does not stand for "it is" or "it has" then what you require it "its". This is extremely easy to grasp.*
* Emphasis is not mine. It is actually italicized like that on the calendar page.