One of the most common errors I see, whether it’s in a court reporter’s deposition transcript or on a billboard in Downtown Atlanta, is the use of it’s as the possessive form of it.
EXAMPLE: Virtue is it’s own reward. (Incorrect!)
While it may seem logical that the possessive form of it would be it’s, the word it is a pronoun, meaning it replaces a noun when used in a sentence. In the example above, it is a pronoun replacing the word virtue, meaning “Virtue is virtue’s own reward.”
Without exception, possessive pronouns are already possessive without using ’s. For example, you know that his is the possessive form of he; hers is the possessive form of her; yours is the possessive form of your, and so on. By the same token, its is the possessive of it. Also without exception, no pronoun may be made possessive simply by adding ’s. The possessive pronoun must be used. Only nouns may be made possessive by adding ’s.
The word it’s when properly used is the contraction form of it is. I believe the reason the error is so common is because it’s is in fact a proper English word, pronounced exactly the same as its, even though it is often used improperly. So if you just keep in mind that it is a pronoun, and you can never make a pronoun possessive by adding ’s, this error can be easily avoided.