Prompt user for input then create an acronym from it
The procedure name acronym does not tell you what this procedure is doing. Naming it create_acronym would make the code more obvious.
Error checking: You assume that the user only enters a single space between words. This will cause problems if the user enters more than one space by accident, introducing spaces in your acronym
Most times acronyms are capitalized. You might want to capitalize each letter before adding it to the phrase.
With renaming your procedure create_acronym, you can rename the phrase variable to acronym, which is more appropriate since an acronym is not a phrase. A phrase is one or more words.
Pausing execution: Some say using system("PAUSE") is bad. Instead, just read from cin to a variable and discard the value. That way the application will hang waiting for input until the user presses the ENTER key.