[<< wikibooks] Word formation/Acronymisation
The products of acronymisation are called acronyms. These word-structures are made of several other words' initial segments that make up a whole and serve as a meaningful shortening of a longer phrase. This definition is also true for abbreviations. 
The key to distinguish the two is the manner of pronunciation of either derivatives. Whereas acronyms are pronounced as a complete word, the other type rather as a series of separate letters. This being said, one will pronounce the acronym UNESCO (United Nations Educational, Scientific, and Cultural Organisation) as [ju ˈnesk əʊ], and UFO which is an abbreviation as [ˌjuː ef ˈəʊ].