'that' focuses on the thing more, like 'wow, look at that - what a good thing - that would be great' 'it' just adds a comment about something you already mentioned, so it doesn't have that feeling. so they can be used like this: eg: 'He bought a Ferrari' --> "Really, wow, that's cool!" (the new information) or 'He bought a Ferrari' --> "Yeah, I know. It's cool" (the thing I know already) :)

That means "that". That's means "that is." It just depends what you need your verb to be. If you say "That is", "is" is the verb. If you say "That will be", "will be" acts as the verb. It is similar with it/ its/ it's. It's means "it is". "it's getting dark/ it is getting dark." "It will be dark by 7." or "It was dark by 7." (same thing here with with verbs it/ will be/ was as the verb). Its is difficult in english (many english speakers mess it up). Its means possession but you do not use an apostrophe like you do with other possessives. Bryan's coat shows possession, but a sentence like " Where is the car's spare tire?" you say. "What?" says someone else. You say, "Where is its spare tire?"