Phonics is the relationship of letters and letter sounds and how these letters and sounds combine to form words. Phonics is a cornerstone for reading and writing. It's what people are talking about when they tell kids to "sound it out." It involves consonant sounds, vowel sounds, and word families.
Studies have shown that a systematic approach to phonics is best for future reading and writing achievement. A systematic approach means that you have organized how you will teach phonics and aren't jumping from one concept to another with no rhyme or reason.
Experts will tell you that phonics instruction starts in kindergarten, but homeschoolers know that preschoolers, and even toddlers, can pick up basic phonics instruction. If you're yearning to start teaching reading, phonics should become a part of your everyday routine. Even if you only get 15 minutes of instruction in, that is something you can build on throughout the year. And homeschoolers don't really need to dedicate a 90-minute reading block like the public schools do, because the one-on-one attention means kids really learn what they need to in the first 15 to 20 minutes, at least in my experience.
Here is how our homeschool teaches phonics, with preschool focusing on consonant, vowel, and beginning letter sounds:
Beginning consonant letter sounds - focusing on the different sounds C and G can make in the beginning (cat-cent, go-gem)
Vowel sounds - with a focus on long e
Word families - ock, ake, etc...
Beginning consonant combinations - Br, Gr, Pr, Qu, Ph
Ending sound combinations - ing, ed, etc...