Phonetic describes the way that spoken words sound. To sound out an unfamiliar word, you break it into its phonetic parts, saying each in the order in which it appears.
When you use the word phonetic, you're talking about pronunciation, or the way language sounds. When you learn how to speak Chinese, for example, you're often taught both traditional Chinese characters and a phonetic alphabet, which helps people learn to correctly pronounce Chinese words. The Greek word for sound or voice is phone, and it's the root of phonetic, which was first used in the early 1800s.