The word acronym was coined in 1943 by Bell Laboratories to refer to new words like RADAR that had been created from the initials of the words in phrases.
Distinctions can be made between initial letter constructions that can be pronounced as words (RADAR) and those which can be pronouced only as letters (FBI).
Strictly speaking, RADAR is an “acronym,” while FBI is an “initialism.”
Unless one is addressing an academic audience, the word acronym may be used to refer to any word formed from the initials of other words. For one thing, acronym is a more familiar term than initialism. For another, many words formed from initials defy easy categorization. Some don’t even have widely agreed-upon names to describe them.
… pronounced as a word
WAC – Women’s Army Corps
NATO – North Atlantic Treaty Organization
LASER – Light Amplification by the Stimulated Emission of Radiation
…pronounced as initials
FBI – Federal Bureau of Investigation
ATM – Automated Teller Machine
BBC – British Broadcasting Corporation
AFL-CIO – American Federation of Labor-Congress of Industrial Organizations
…pronounced partly as letters, partly as syllables
JPEG – Joint Photographic Experts Group
MS-DOS – Microsoft Disk Operating System
CD-ROM – Compact Disc read-only memory
…pronounced as words by some speakers; as letters by others:
FAQ – Frequently Asked Questions
LED – Light-Emitting Diode
ASAP – As Soon As Possible
IRA – Individual Retirement Account
SAT – Scholastic Achievement Test
…pronounced as letters and words
AAA (Triple A) – American Automobile Association
NAACP (N double-A CP) – National Association for the Advancement of Colored People
…formed from letters within a word as well as initial letters
DNA DeoxyriboNucleic Acid
SONAR – SOund Navigation And Ranging
XML – eXtensible Markup Language
I’ll worry about specific labels for the different types when I’m called upon to write an academic treatise on the subject. For ordinary conversation and informal writing, I’ll go on calling them all acronyms.
For those who like to make nice distinctions in such matters, this Wikipedia article is a wealth of information.