Shorter words, the same message
A contraction is a shortened form made by leaving out letters or sounds. In common written English contractions, an apostrophe marks the missing letters: I am becomes I’m.
Merriam-Webster defines the shortening, while the Canadian Translation Bureau shows how apostrophes work. “I’m ready” gives the same basic message as “I am ready”, in a shorter form familiar from conversation.
Expand the parts to check the meaning
We’re expands to we are: “We’re waiting” means “We are waiting”. Don’t expands to do not: “Don’t open it” means “Do not open it”. The apostrophe is doing a different job from marking possession.
Some forms need the rest of the sentence. It’s raining means it is raining. But it’s been raining means it has been raining. The same short form can represent different full words.
Rather than guessing from the apostrophe alone, expand the words and read the sentence. “It has raining” does not fit; “It is raining” does.
It’s and its have different jobs
Its, with no apostrophe, is the possessive form: “The cat lifted its paw.” It tells us whose paw is involved. Replacing it with “it is” or “it has” would not work.
Merriam-Webster recommends this distinction: use it’s where it is or it has fits, and its for the possessive. An apostrophe is not a universal ownership badge.
A contraction also differs from a compound such as raincoat. A compound brings words together; these contractions shorten familiar combinations by leaving letters out. If similar sounds cause trouble, compare homophones.