Differences Between an Initialism and an Acronym

An initialism is an abbreviation that consists of the first letter or letters of words in a phrase, such as EU (for European Union) and NFL (for National Football League). Also called an alphabetism. 

Initialisms are usually shown in capital letters, without spaces or periods between them. Unlike acronyms, initialisms are not spoken as words; they are spoken letter by letter. 

Examples and Observations

• ABC (American Broadcasting Company, Australian Broadcasting Corporation), ATM (Automatic Teller Machine), BBC (British Broadcasting Corporation), CBC (Canadian Broadcasting Corporation), CNN (Cable News Network), DVD (Digital Versatile Disc), HTML (HyperText Markup Language), IBM (International Business Machines Corporation), NBC (National Broadcasting Company)
• Some names that began as initialisms have evolved into brands independent of their original meanings. For example, CBS, the American radio and television network, was created in 1928 as the Columbia Broadcasting System. In 1974, the name of the company was legally changed to CBS, Inc., and in the late 1990s, it became CBS Corporation.
  Similarly, the letters in the names SAT and ACT no longer represent anything. Originally known as the Scholastic Achievement Test, the SAT became an Aptitude Test in 1941 and an Assessment Test in 1990. Finally, in 1994, the name was officially changed to SAT (or, in full, SAT Reasoning Test), with the letters signifying nothing. Two years later, American College Testing followed suit and changed the name of its test to ACT.

Initialisms and Acronyms

"My favorite current acronym is the DUMP, a term universally used in Durham, New Hampshire to refer to a local supermarket with the unwittingly unfortunate name 'the Durham Market Place.'

"Initialisms are similar to acronyms in that they are composed of the first letters of a phrase, but unlike acronyms, they are pronounced as a series of letters. So most people in the US refer to the Federal Bureau of Investigation as the FBI...Other initialisms are PTA for Parent Teacher Association, PR for either 'public relations' or 'personal record,' and NCAA for National College Athletic Association."
(Rochelle Lieber, Introducing Morphology. Cambridge University Press, 2010)

"[S]ometimes a letter in an initialism is formed not, as the term might imply, from an initial letter but rather from an initial sound (as the X in XML, for extensible markup language), or from the application of a number (W3C, for World Wide Web Consortium). Furthermore, an acronym and an initialism are occasionally combined (JPEG), and the line between initialism and acronym is not always clear (FAQ, which can be pronounced either as a word or as a series of letters)."
(The Chicago Manual of Style, 16th ed. The University of Chicago Press, 2010)

CD-ROM

"CD-ROM is an interesting mix because it brings together an initialism (CD) and an acronym (ROM). The first part is sounded letter by letter, the second part is a whole word."
(David Crystal, The Story of English in 100 Words. St. Martin's Press, 2012)

Usage

"The first time an acronym or initialism appears in a written work, write the complete term, followed by an abbreviated form in parentheses. Thereafter, you may use the acronym or initialism alone."
(G. J. Alred, C. T. Brusaw, and W. E. Oliu, Handbook of Technical Writing, 6th ed. Bedford/St. Martin's, 2000

AWOL

"In AWOL--All Wrong Old Laddiebuck, an animated film by Charles Bowers, a woman presents her calling card to a soldier and it reads 'Miss Awol.' She then lures him away from camp without permission. The film is silent, of course, given the 1919 date, but the calling card indicates that AWOL is pronounced as a word, making it a true acronym and not just an initialism."
(David Wilton and Ivan Brunetti, Word Myths. Oxford University Press, 2004)

Pronunciation: i-NISH-i-liz-em

Etymology
From the Latin, "beginning"