What is the difference between
"it is good"
"that is good"
By itself, I'd interpret it is good to mean all is well.
However, I can't imagine myself saying it quite that way, although I might say, "It's all good" as an informal way of saying It's alright:
I can't believe I broke the vase! I'm so sorry.
Response: It's all good – don't worry about it.
In that case, "It's all good" essentially means: I understand; it was an accident.
As for that is good, I'd probably say that as a contraction much more often than not: That's good.
That's good is usually said as a reply to someone else. Because of the word that, some kind of context needs to be set, so the listener knows what the speaker is referring to. It often means something like, good job, or, it sounds like things are going well so far. For example:
The lawnmower is almost fixed. I've put the new head gaskets in, and now I just need to put the carburetor back on.
Response: That's good. Why don't you wash up and eat dinner? I can help you finish up after we eat.