This is not strictly a question for Poll as there should be no opinion involved. They are two distinct terms having very different meanings. ' It's ' is the abbreviated form of ' It is ' so is correct in the sentence you presented ' It's a lovely town ' = ' It is a lovely town ' The apostrophe takes the place of the missing letter(s) just as it does in Can't = Cannot Shouldn't = Should not.
' Its ' without the apostrophe (pronounced apostroffee) is used to show the possessive - that is - belonging to it. The dog chased its tail. The trouble is that we usually use the apostrophe to denote the possessive - as in ' Jane's bag ' - the bag belonging to Jane - so there is an inclination to think of ' It's ' as denoting the possessive. This then leads to confusion about what do do with Its
How about something to trigger the memory -
Remember - The possessive it has lost its apostrophe