Paine is saying that people need some form of government, but that government is inherently intrusive, that there is always a danger of a government disregarding the best interests of the people.
He says that in its best form government will cause some annoyance or injustice, but as a necessary evil it must be tolerated. Finally, he says that 'in its worst form', government so far oversteps its rightful place in people's lives that it becomes intolerable (and must be changed).
I hope this is helpful,
PS: 'its' takes an apostrophe ONLY when it is a contraction of 'it is', not in the possessive form.