It's elementary, my dears

When I was a wee lad studying journalism in college, my editing professor used to say that he was not prone to violence but that he should be able to hit us when we misused its/it's. He had a point. This is something we were taught back in grade school, yet I still see this misused all the time in advertisements, in e-mails and, yes, even in our own corporate communications.

Here's the deal.
Its without an apostrophe is the possessive form of it.
Example:
The lion flashed its enormous teeth.

It's with an apostrophe is a contaction of it is.
It is scary to see a lion's big teeth.

If you ever in doubt about this, try substituting the it in your sentence with it is. If it works in that case, you need an apostrophe. If it doesn't, do not.
Example 1:
It's a beautiful day. (Sentence is still correct if you wrote "It is a beautiful day." So, the apostrophe is correct in this case.)

Example 2:
Its teeth were as big as sabers. (Sentence doesn't make sense when you write "It is teeth were as big as sabers" so you are correct in not using the apostrophe here.)