The word "they" may refer to a gender-specific pronoun, or it may refer to a person describing another. The word "it" may refer to a thing, animal, etc.
Explanation:
When describing a person, you do not use the word it. This is because a person, unlike a dog or a cat, can be easily identified by gender or name. Another animal may not show specific traits that define its gender, and they may not possess the ability to verbalize; in this circumstance, you would refer to the creature (or object) as "it".
