Douglas Harper's Etymology Dictionary
word formed from the first letters of other words or a phrase, 1957, from initial (n.) + -ism. The distinction from acronym is not universally agreed-upon; in general, words such as NATO, where the letters form a word, are regarded as acronyms, those such as FBI, where the letters sound as letters, are initialisms. The use of acronym in entries in this dictionary that are technically initialisms is a deliberate error, because many people only know to search for all such words under "acronym."
n. A term formed from the initial letter or letters of several words or parts of words, but which is itself pronounced letter by letter.