In order to validate the digital transaction, using the CAPTCHA system the user is presented with a distorted word typically placed on top of a distorted background. The user must type the word into a field in order to complete the process. Computers have a difficult time decoding the distorted words while humans can easily decipher the text. Some CAPTCHAs now use pictures instead of words where the user is presented with a series of pictures and asked what is the common element among all of the pictures. By entering that common element, the user validates the transaction and the computer knows it is dealing with a human and not a bot.
The word public in the term refers to the fact that the algorithm used is made public instead of being held secret. The idea is that breaking the scurity of a CAPTCHA depends on artifical intelligence; discovering the algorithm itself does not defeat the security measures. The term was coined by Luis von Ahn, Manuel Blum and Nicholas J. Hopper of Carnegie Mellon University, and John Langford of IBM in 2000.