An initialism is an abbreviation formed from the first letter -- the initial -- of each of the words in a term.
Initialisms are very common in information technology. API (for application-program interface), BCI (for brain-computer interface) and CAE (for computer-aided engineering) are just a few of the many examples.
The term initialism is often used as a synonym for acronym. However, although initialisms can be acronyms (and vice-versa) there are some abbreviations that belong in just one category or the other.
Strictly speaking, an acronym can be pronounced as a word. By that definition, GUI (for graphical user interface), which is usually pronounced as gooey, is an acronym as well as an initialism but GPU (for graphics processing unit) is just an initialism.
Similarly, some acronyms are made from the parts of multiple words rather than initials, which means that they don't qualify as initialisms.
Although some authorities, including Merriam-Webster, maintain that the terms can be used interchangeably, others insist that they be differentiated.
See Penn and Teller's brief explanation of the difference between initialisms and acronyms: