“It” is used to describe an object that both parties already know what you are talking about. “They” is a subject pronoun that is used for plural groups of people or things.
What do you think of it? It looks amazing!
They are from Poland.
We use “It” to refer to objects that both people understand through context of a previous conversation.
We do not use “it” for people.
Where is my coat? I can’t find it.
What can I do with this shirt? Put it in the bin.
In the first sentence, “It” is the guitar and in the second sentence, “it” is the shirt. We use the pronoun “it” to replace the noun(guitar) so we don’t have to keep repeating “coat”.
It can also be the subject of the sentence.
It is a beautiful day.
It is correct.
The noun is often implied and never explained because it is obvious from the context. In the first example, it replaces “the weather” and in the second example it could replace the exam question but we need more context to understand. In this context is necessary to use “it”.
“They” is the third person plural subject pronoun. This means that we use “they” when a group of people do something but does not include the speaker. We also use “they” when plural objects perform an action.
Peter and John are here. They took part in the project.
The machines are incredible, they can produce a thousand pens an hour.
It vs They
It is important to notice when to use “it” and when to use “they”. We often use “it” when we have already mentioned a subject. You need to be careful with that subject. If the subject is singular then use “it”. If the subject is plural, then use “they”.
The building is destroyed. It needs to be rebuilt.
The buildings are destroyed. They need to be rebuilt.
The other difference is that “it” can only be used for objects whereas “they” can be used for people or objects.