Learn Italian: Vivo in Italia.

In Italian, the choice between in and a for locations depends on the type of place. We use in for countries, continents, regions, and large islands. We use a for cities and towns. Since Italy is a country, we use in.

Does in Italia mean "in Italy" or "to Italy"?

It can mean both, depending on the verb! With a stationary verb like vivo (I live), it means "in Italy." If you used a verb of motion like vado (I go), it would mean "to Italy." The simple preposition in is used for both location and destination when talking about countries.

Why don't we use the word for "the" and say nell'Italia?

When you are simply stating that you are in (or going to) a country, Italian uses the simple preposition in without adding the definite article ("the"). You only combine in with the article if you are adding specific descriptive details, such as "in southern Italy."

Where is the word for "I" in this sentence?

The "I" is built right into the verb. Vivo comes from the regular verb vivere (to live), and the -o ending means "I live." Italian usually drops subject pronouns like io (I) because the verb ending already tells you exactly who is doing the action.