An acoustic model is a file that contains statistical representations of each of the distinct sounds that makes up a word. Each of these statistical representations is assigned a label called a phoneme. The English language has about 40 distinct sounds that are useful for speech recognition, and thus we have 40 different phonemes.
An acoustic model is created by taking a large database of speech (called a speech corpus) and using special training algorithms to create statistical representations for each phoneme in a language. These statistical representations are called Hidden Markov Models ("HMM"s). Each phoneme has its own HMM.
For example, if the system is set up with a simple grammar file to recognize the word "house" (whose phonemes are: "hh aw s"), here are the (simplified) steps that the speech recognition engine might take:
This get a little more complicated when you start using Language Models (which contain the probabilities of a large number of different word sequences), but the basic approach is the same.
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