As I recall, ^H means Backspace. I generated it by pressing CTRL+V, CTRL+H.
So the ^H should remove the last character, as it is the same as Backspace and it should act just as if I pressed Backspace at this position.
Why the does the output of echo abc^H remain abc and not ab?
^Hmeans "cursor left one". – Ignacio Vazquez-Abrams May 2 '12 at 23:33