We know; that's a lot of "Its." "It" refers to the menacing, evil, incredibly ancient power that lurks under Derry. It arrived sometime when saber-tooth tigers were still prowling around Maine, it survived several ice ages, and thrives in the dark tunnels of the Derry sewer system.
What makes It so fearsome is Its nebulousness: It manifests as what you fear the most. Because of this, It has no name. It can simply be referred to with a neutral pronoun. And somehow, that makes It extra terrifying.