In English, there are four main classifications of shortened words and phrases.
All types of shortened words and phrases are technically abbreviations, but we generally use this term to denote shortened words—for example, Dr. in place of Doctor, pars. in place of paragraphs, Found. in place of Foundation, lbs. in place of pounds, AK in place of Alaska.
Acronyms are formed from the initial letters of phrases or compound terms. For example, the word radar comes from radio detecting and ranging. Some acronyms, such as radar and scuba (self-contained underwater breathing apparatus) become words in their own right and hence are uncapitalized and unpunctuated. Other acronyms, such as NATO, AIDS, and NAFTA, are capitalized because the original words are capitalized (e.g., North Atlantic Treaty Organization). In 21st-century English, they are usually unpunctuated (though some publications resist this trend).
Although acronyms are technically initialisms, we usually use this term to describe initial-letter abbreviations that are pronounced as letters rather than words—for example, CEO, AKA, FBI, r.p.m., and USA. The trend with initialisms is away from using periods, although many publications use periods when the original words are uncapitalized (e.g., r.p.m. from rotations per minute, and e.g. from the Latin loan phrase exempli gratia).