Learn Russian: Жаль, что было холодно.

Because холодно (cold) is used here as an impersonal expression. There is no grammatical subject (like a man, woman, or specific object) that is cold. When a sentence has no subject, Russian always defaults to the neuter form of the past tense, which is было.

Why isn't there a verb next to Жаль?

Жаль means "it is a pity." Because it refers to the present time, Russian simply leaves out the "to be" verb, just like it does in sentences like "I am a student." If you wanted to say "it was a pity," you would use the past tense verb to make it было жаль.

Why isn't there a word for "it" in either half of the sentence?

In English, we have to use "it" as a placeholder subject: "It is a pity that it was cold." Russian impersonal sentences are truly impersonal—they do not use a subject pronoun at all. You just use the adverb by itself (like жаль) or with the neuter verb (like было холодно).

Is что pronounced "chto" or "shto" here?

It is pronounced што (shto). Even when it is used as a connecting word meaning "that" (rather than a question word meaning "what"), it always keeps this special pronunciation.