You're using the bathroom at a restaurant. There's only one toilet. Someone is trying to open the door, and you want to let them know that they can't come in because you're already in there. You yell:
It's occupied!
(something) is occupied
When there are people in a room, you can say that it "is occupied". "Occupied" means that something is in a place. One way this is often used is to express that a place already has someone in it, so you can't use it. This is a pretty formal use of the word. In casual English, you'd say
Someone's in here!
People use "occupied" to talk about bathrooms a lot. In fact, on airplanes, the sign outside of the bathroom that lights up when someone's inside says "OCCUPIED". But you can also use "occupied" to talk about taxis, hotel rooms, or anything else that you can't use because people are already in there.
It's occupied!
People usually use the word "it's" in this expression. English learners often make the mistake of saying "Here is ___", but it's usually not correct to use "Here" as the subject of your sentence.
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