What's an Acronym?

An Acronym is not a word and is not even a made up word. It is not abbreviation either as for example Mr. (Mister) or Am. (American) but we could say it is a form of abbreviation.
In order to form an acronym you first need a phrase that needs to be reduced to make things easier in the context where all these things are happening. Let's say you just don't want to write something like as soon as possible because you find the expression a little bit too long for your tastes so you decide to make an acronym out of it (it´s been done already). For that you must take the initial letter of every word in that phrase and thus you have your acronym: ASAP (As Soon As Possible).  Here are some other acronyms:
AIDS (Acquired Immune Defficiency Ssyndrome)
BBC (British Broadcasting Corporation)
BTW (By The Way)
CEO (Chief Executive Officer)
CPU (Central Processing Unit)
FAQ (Frequently Asked Questions)
LCD (Liquid Crystal Display)
LOL (Laughing Out Loud)
PIN (Personal Identfication Number)
UNO (United Nations Organization)
USA (United States of America)
VIP  (Very Important Person)
There are many others and there are some that are formed not with the initials but with sections of the words of the phrase such as the Eurozone (European Zone) or Mercosur (Mercado Común del Sur), BENELUX (Belgium, Netherlands and Luxemburg) or Copei (Colegio Politécnico English Institute) which is actually a combination of both styles.

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