Steve: Yes, these two phrases can be confusing. Maybe some examples might be helpful:
ON TIME:
1. The student was punished because he never comes to school ON TIME. (School starts at 8 o'clock. He always walks in at 8:01.)
2. They say that in country X, the trains are always ON TIME. (If the schedule says that it will arrive in city X at 4:05 p.m., then it will arrive at 4:05 -- not 4:03 or 4:06.)
IN TIME
3. I was very sick. An ambulance took me to the hospital. The doctor said, "You are very lucky. If you had arrived any later, I could not have saved your life. You arrived just in time."
4. I decided to visit my friend Tom. He did not know that I was coming. When he opened the door and saw me, he said, "Hi, dude! You are just in time for dinner. Come join us for a lobster dinner."