Proper capitalization of commonly used acronyms and initialisms

I suppose the writer felt that it was now widely enough understood to be written as a normal word. The UK newspaper ‘The Times’ did the same as long ago as 1966:

President Kekkonen's proposals for a neutral ‘Fenno-Scandia’, to include not only Finland and Sweden but also Norway and perhaps Denmark if they were prepared to leave Nato.

‘The Independent’ did so in 2001:

Soldiers have been pouring into the city to reinforce Nato-led peace-keepers.

Nato-ish and Nato-ism have also been found.

Per @Nohat's answer to this question, there's no universally-accepted definition of "acronym", but personally I normally only use it if the "initialism" spells out a pronouncable "word", such as Nato.

It's quite normal for well-known acronyms by my definition not to be capitalised at all (eg - laser). The first letter is capitalised as normal if the acronym is in fact a proper noun.

The BBC News Styleguide (March 2003, pdf) says:

Abbreviations & acronyms

One should not aim at being possible to understand but at being impossible to misunderstand. Quintilian

Just because you know what NACRO means, and the people you’ve discussed the story with know what it means, it doesn’t follow that the majority of your audience know. Assume nothing. Some short forms such as NATO, CIA, BBC, ITV,AA and RAC are well known and need no explanation, but think twice before using others. If you introduce the likes of BECTU, HSBC, RNIB, RTZ,ACAS and the BMA into your scripts without saying what they mean, you are virtually inviting some listeners or viewers to turn off. It’s usually better to give the full name of an organisation at first reference and then use its short form later.

It doesn't explicitly say to capitalise or not, but all these examples are given in upper case, including NATO.

As slim pointed out, the Guardian style guide says to always take an initial cap for pronounced words:

Use all capitals if an abbreviation is pronounced as the individual letters: BBC, VAT, etc; if it is an acronym (pronounced as a word) spell out with initial capital, eg Nasa, Nato, unless it can be considered to have entered the language as an everyday word, such as awol, laser and, more recently, asbo, pin number and sim card. Note that pdf and plc are lowercase.

This sometimes looks a bit strange in print, with unfamiliar acronyms rendered as words, even when the organisation in question and most people use all capitals.

My advice is to follow your style guide (if you have one), or decide per acronym whether to capitalise based on how the organisation or owner writes it, and based upon popular usage. And thereafter be consistent.

NATO themselves use all capitals, and this is also the most common:

But the BBC have been using Nato more recently. Perhaps they have decided it is well known enough that it can be written like this, in a similar way that LASER and RADAR have become naturalised as laser and radar.