"It" has a more general meaning, and can be used to indicate an object that is not present or when not trying to be specific. For example, "I dropped a coin, do you see it?" "It is cold outside" "Look it up!" "That" has a more specific meaning, indicating an object that is present or a specific thing. For example, "Did you see that coin on the ground back there?" "Look at that over there" "Look that word up." Even though they do have different meanings, there's a lot of overlap, even in the examples I just used. The difference is pretty subtle, but those are generally the differences.