Both acronyms and initialisms are abbreviations, but there is a key difference between the two, at least at present. Due to rampant misuse of the term “acronym” some dictionaries are now starting to add an extra definition to it, allowing acronyms to expand their scope to include initialisms. So as the English language evolves, this additional definition of acronym may stick and become widely accepted. But at present, it’s generally still good form to distinguish between the two.
Acronyms, of course, are abbreviations where the abbreviation is formed from letters of other words (usually the first letter of each word, though not always). The part of the definition of acronym that many people miss is that the resulting abbreviation needs to be pronounceable as a word. Examples of this would be things like RAM (Random Access Memory); LASER (Light Amplification by Stimulated Emission of Radiation); NASA (National Aeronautics and Space Administration), and OPEC (Organization of Petroleum Exporting Countries).
Initialisms are very similar to acronyms in that they are made up of letters of some name or phrase, usually the first letter of each word as is common with acronyms. The difference between an acronym and initialism is that the abbreviation formed with initialisms is not pronounced as a word, rather you say the individual letters, such as FBI (Federal Bureau of Investigation), CIA (Central Intelligence Agency), and DVD (Digital Video Disk*).
And, of course, if it’s just a shortened form of a word, like “ex.” for “example”, then it’s neither an acronym nor an initialism, rather just an abbreviation.
Another thing about acronyms and initialisms that often causes confusion is whether or not one should place periods after each letter in order to be grammatically correct. Some grammar guides do advise doing so, but just as many say you should not, usually arguing that to add the periods can sometimes make things look messier and it’s already clear by the all-capitals that it’s an abbreviation, so the periods are pointless *snicker*. So really, it’s whatever you prefer as to whether to put periods after the letters of acronyms and initialisms or not. The important thing is just to be consistent throughout your writing.
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*DVD probably originally stood for “Digital Video Disk”, but today often is changed to stand for “Digital Versatile Disk”
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