In the 1990s, I worked for the Ministry of Defense in Holland, and I probably don't need to tell you that the military are art masters of the abbreviation. To a grating extent, sometimes. I used to be employed at the medical supplies division. Even if you know the Dutch, it does take a little gnashing of the cogs upstairs to work out what GNKDGDN stands for.
However, you don't need the army to make a meal of an abbreviation. Quite often, the abbreviation is there to cut down on the number of seconds, spent writing out a big long word, e.g. exemplia gratia. We all write e.g., and we all know what it means. When we speak, the phrase turns into for example.
A different form of contracting words or phrases consists of picking out the initial letters of the constituent words and putting them down as one word. The World Health Organisation is turned into WHO. Nobody will pronounce that as the interrogative who? Everybody spells out the individual letters in pronounciation. That is what you call an initialism. When the initial letters, put together, turn into a word that you can pronounce without causing confusion or difficulty, it is termed an acronym. Sometimes, additional letters are drawn in, added to initial letters, to make a pronounceable word. The word NATO (North Atlantic Treaty Organisation) is a case in point, as is SONAR (Sound Navigation And Ranging).
Wikipedia has an excellent article on this issue - the post was prompted by a letter in the Glasgow Herald of 12 October 2009.