An acronym is made up of the first letters of a group of words and is then capabale of being spoken as a ‘word’. NATO is therefore an acronym but USA is not.
As Alan explained, an acronym is pronounced as a word rather than letters. You don’t say “I work for the ‘n’, ‘a’, ‘t’, ‘o’.” but “I work for the Nato.” By the way, you might want to read Alan’s essay on acronyms and abbreviations.