Q:

What does "it" refer to in "it's raining"? 

I wanted to leave the question title as is so as not to take away from my amusement :).
Anyway,

It's raining.

What is raining? Is it the sky? The clouds? The weather? The rain? What is "it"? Any historical insights on the statement?

A:

Definitions for it in my Webster's 3rd New International Dictionary include:

2a used as an expletive subject of an
  impersonal verb that expresses a
  simple condition or an action without
  implied reference to an agent about
  the weather ... or time.

It is raining or It is two o'clock are examples of 2a.

2b used as an expletive subject in other statements or questions having
  an undefined subject

If it hadn't been for your help, I couldn't have finished in time is an example of 2b.

3a used as an anticipatory subject of a verb whose logical subject is
  another word or phrase or clause

It is I who have the answer to the question is an example of 3a.

A:

Nothing. 
In some languages, a subject is always present in the sentence, even when conceptually there is no subject. English is one of them, as well as French ("il pleut" for "it's raining").
In other languages, like Portuguese for example, you don't use any word for the subject when it doesn't exist. We say "chove" (just the verb) for "it's raining".

A:

Well, the short answer is that it does not matter.  The widely accepted explanation is that the “it” in “it is raining” does not refer to anything.
If you are curious, the verb “rain” is sometimes used with a subject such as the sky and clouds.  The Oxford English Dictionary (the link requires subscription) gives many examples of this usage from Old English to the twentieth century.  One of them is:

1972 Nature 24 Mar. 139/1  The primary purpose of the experiments with seeding clouds was to increase the amount of rain from the clouds, or to cause them to rain if they would not otherwise have done so.

(Emphasis added on “cause them to rain.”)
Note that I am not implying that the “it” in “it is raining” actually refers to the clouds or the sky.

