Final answer:
In the context of the provided sentence, the pronoun 'it' refers to the surprise party that the speaker had planned, which was ruined by the rain.
Step-by-step explanation:
In the given sentence, "I wanted it to be a surprise party when the guests arrived but the rain ruined it," the pronoun "it" refers to the event of the surprise party that the speaker had planned. The pronoun is used to replace a noun previously mentioned or easily identified in the context, which in this case is the surprise party. The rain, unfortunately, disrupted the plans and spoiled the surprise element of the party.