“Your” is a possessive pronoun. “You’re” is contraction of “You are”, a pronoun and verb. So a sentence might correctly read: “It’s your house now that you’re living in it.”
The problem is that the texting habit and computer-based communication has encouraged the development of a vernacular shorthand, some of which is acceptable because its identity as shorthand is obvious – as in “u” for “you” – and some of which isn’t because it’s leading to the mistaken belief that the shorthand version is correct. “Your” for “You’re” is a perfect example.
OK, so I do know that the English language is not writ in stone. It’s constantly evolving and “correctness” is ultimately established by commonality of use, not the didactic railings of a grammar text book. In the case of your and you’re, however, I think the conservative view has to hold sway, and that the ire I feel when I read “your welcome” is wholly justified. That isn’t because I’m offended by a lack of correctness, but because allowing “your” for “you’re” to become acceptable would be both illogical and replete with the potential for unnecessary confusion. There are times when getting it right is simply right.
(Sorry if this is boring. I seem to be in that kind of mood. And it’s Sunday morning in Sydney, NSW, which happens to matter to me.)