In general, you can think of irony as occurring when an outcome undermines someone’s expectations. Verbal irony happens when conversational expectations are undermined. When another person listens to you speak, he usually assumes you’re saying what you mean. If you use verbal irony, you say something that you don’t want a listener to take literally. Sarcasm is one kind of verbal irony: If it’s storming, you might say, “Oh, what perfect weather for a picnic!” but expect your friend to realize that you mean just the opposite. Overstatement (hyperbole) and understatement (litotes) are also types of verbal irony. As is probably clear, verbal irony is heavily context dependent -- listeners or readers must know something about the speaker’s situation to interpret it correctly.
Dramatic irony occurs when the audience knows something that a character doesn’t know. Usually, this “something” is a crucial piece of information for a decision that the character has to make. (This is the kind of irony that makes you scream at an unsuspecting heroine, “Don’t go out the back door-- the killer’s waiting there!”) For example, in William Shakespeare’s play “Romeo and Juliet,” Romeo finds Juliet in a drugged sleep, but mistakenly believes that she is dead and, in great distress, commits suicide. The gap between Romeo’s perspective -- that Juliet is dead -- and the audience’s perspective -- that Juliet is merely feigning death -- constitutes dramatic irony.
Situational irony happens when a text’s plot takes a completely different turn than both the characters and the audience expect. For instance, In “Star Wars Episode V: The Empire Strikes Back,” the story’s hero, Luke Skywalker, learns that the evil Darth Vader is really his father -- and the audience is just as surprised as he is. Situational irony is also sometimes called “cosmic irony” or “irony of fate.”
Once you pinpoint and define irony, in your literary essay, you can show how irony is working to create, reinforce or undermine an overall theme of the text. For instance, in the example of dramatic irony from “Romeo and Juliet,” you could argue that Romeo’s hasty actions in response to his assumption comment on a larger theme of the play: the feud between his and Juliet’s parents. Although we might understand a smitten young lover’s rash decision to join his sweetheart in death, we can contrast his excusable immaturity with the parents’ inexcusable immaturity in holding a grudge that costs many lives. The dramatic irony of the death scene heightens our emotional response to the unnecessary nature of the lovers’ deaths. That emotion then makes us more invested in the play’s resolution, when the feuding families reconcile, and helps us to internalize one of the play’s messages: Bitter hate wounds the hater most deeply. As in all literary essays, make sure to discuss plenty of quotations (here, the ironic passages) as well as the textual and historical context to demonstrate irony’s role in the text as a whole.