Hello bobinator! Great question!! I am actually at a habitability group meeting right now =) That means we are spending the entire day sitting around talking about exactly what you are asking!
The answer is quite complex. And, importantly I can say we don’t have a definitive answer of one thing that indicates a planet harbors life. Typically it will be a host of what we call biosignatures (signatures of life). The presence of liquid water is a big potential indicator of life. But it is not a biosignature on its own. It merely tells us where we might find life. For these reason we pay a lot of attention to Mars, Europa (moon of Jupiter), and Encleades (moon of Saturn) for looking for life in our Solar System. Other signs are atmospheric gases. For example, oxygen is considered a big potential sign of life. Our own atmosphere didn’t become rich in oxygen until the invention of photosynthesis around 2.5 billion years ago. We have an oxygen rich atmosphere because of life! Similarly some speculate that Titan (a moon of saturn) might harbor life. It has a methane atmosphere and methane lakes. Some organisms on Earth, call methanogens, actually produce methane so it is possible similar microbes could be living on Titan right now. The final feature we try to look for is organics molecules. These include things like carbon compounds that are produced or used by living systems (e.g. things like amino acids that make up or proteins). Organics are hard though – a lot of nonliving processes, in example rock weathering, can produce a lot of things that are similar to biology. So it is not any one thing that can tell hus a planet has life, but a whole suite of indicators taken together can be quite convincing!