A phoneme is the smallest sound in a spoken language. There are 42 in American English, according to some experts, but more if regional pronunciations are considered. Many are represented by a single letter—b and h, for example. But others are represented by a pair of letters—sh and th, for example. A phoneme is not a letter; it is a sound to which we have associated a letter in order to read the sound. By itself, a phoneme has no meaning.
Phonemic awareness is the ability to hear words at the phoneme level, to hear that the word “cat” contains three separate sounds. Phonemic awareness does not mean letter awareness. A child can have phonemic awareness without knowing the ABC’s. It means the ability to pull apart words and to say the separate sounds in words. It means a child can recognize that all the sounds we make can be put together various ways to create words.
Phonics is the code, the assigning of sounds to symbols (letters) so that the sounds can be pronounced correctly by looking at visual letters. With more than 250 letter patterns to represent all the sounds in American English, reading instruction focuses mostly on phonics.
Children with excellent hearing and from a language-rich environment pick up phonemic awareness early in life because they hear all the sounds of American English. Before they start school they may be able to pronounce all the phonemes correctly, echoing an adult. But most children cannot figure out phonics on their own. They need instruction matching a sound to a letter or letter pair.