It's (it is) and its

Another common error when using apostrophes is the misuse of its and it's.

It's with an apostrophe is always the contraction of 'it is'. You can think of the apostrophe as signalling a missing element in the contraction; in this case, the apostrophe signals the missing 'i' in the word 'is'.

Its without an apostrophe is a possessive pronoun. Like the other possessive pronouns (his, her, their, your, our) no apostrophe is necessary to show possession. Possessive pronouns differ in this way to nouns which do use an apostrophe to show possession; for example,

The committee's decision to implement the safer hours campaign was welcomed.
Its decision to implement the safer hours campaign was welcomed.

Thus:

Use it's when abbreviating 'it is'.

Papua New Guinea has a turbulent history. It's currently experiencing political volatility due to many social and economic upheavals.
Use its when ownership is being signified

Papua New Guinea has a turbulent history. Its political climate is volatile due to many social and economic upheavals.
(i.e. 'it' in this example is the owner of the political climate ­ Papua New Guinea).

NOTE: it is important to note that the use of apostrophes to signal a contractions such as it's (it is) is not encouraged in academic writing.