Learn Spanish (Spain): Eso es el libro y es grande.

Eso is a neuter pronoun. We use neuter pronouns like eso (that) or esto (this) when we are pointing at something to identify it, before we have actually named it. Even though the book (el libro) is masculine, the initial pointing word 'that' uses the neutral eso.

Where is the word for 'it' in the second half of the sentence (es grande)?

Spanish usually drops the subject (like I, you, he, or it) when it is obvious from the context. Furthermore, there is no direct Spanish translation for 'it' as a subject. You simply use the verb es by itself, and it translates perfectly to 'it is'.

Why is the verb es used for both parts of this sentence?

Es is the 'he/she/it' form of the verb ser (to be). We use ser both to identify what an object is (eso es el libro) and to give basic, permanent descriptions or characteristics about it (es grande).

Since el libro is masculine, why doesn't the word grande end in an '-o'?

While many Spanish adjectives change their ending to '-o' or '-a' to match the noun's gender, adjectives that end in '-e' are an exception. Grande is gender-neutral, meaning it is used for both masculine and feminine nouns exactly as it is.