This helpful contraction of they are has two homophones with which it is often confused: the possessive plural pronoun their, as in their son and the adverb there, as in over there.

Contractions such as they're occur chiefly, although not exclusively, in informal speech and writing. They are common in personal letters, business letters, journalism, and fiction; they are rare in scientific and scholarly writing. Contractions occur in formal writing mainly as representations of speech.
They're is often confused with its homophones there and their. While these words sound alike, they are used in very different contexts. There is a word that references special relations, while their is a possessive plural pronoun.