Acronym
An acronym is an abbreviation consisting of the initial letters of several words, which together form a new pronounceable word. Examples: pin, nimby, NATO, wysiwyg.
Abbreviating words is primarily a practicality. Such abbreviations are easier to read and pronounce than the full written term. Also, an abbreviation takes up less space in a text.
If the letters of the abbreviation when pronounced do not form a new word, but remain "separate" letters, we call it an initial word. An abbreviation consisting of several letters of one word is an abbreviation.