Irony works by creating a gap between what's expected or said and what actually happens. Here are the three main types:
1. Verbal Irony

This is when someone says the opposite of what they actually mean, usually for effect (often sarcasm, though sarcasm is a sharper, more mocking subset of verbal irony).

Examples:
- Stepping outside into a freezing downpour and saying, "Beautiful weather we're having."
- A coworker submits a report riddled with errors, and the boss says, "Wow, flawless work."
- After failing a test he didn't study for, a student says, "Yeah, that studying really paid off."

The key is the listener has to catch the mismatch — the words say one thing, the tone or context signals another.
2. Situational Irony

This happens when the actual outcome of a situation is the opposite of what was expected — often with a twist of fate or bitter coincidence.

Examples:
- A fire station burns down.
- A marriage counselor files for divorce.
- A locksmith gets locked out of his own house.
- In O. Henry's The Gift of the Magi, a wife sells her hair to buy her husband a chain for his watch, while he sells his watch to buy combs for her hair — each sacrifices the very thing needed to give the other's gift meaning.

This type is about the structure of events themselves, not about anyone's words.

3. Dramatic Irony

This occurs when the audience (or reader) knows something that one or more characters in the story do not — creating tension, suspense, or dark humor depending on the context.

Examples:
- In Romeo and Juliet, the audience knows Juliet is only sleeping, but Romeo believes she's dead and takes his own life.
- In a horror movie, the audience watches a character walk toward a door, knowing the killer is on the other side — the character doesn't know, but we do.
- In Oedipus Rex, the audience knows Oedipus himself is the murderer he's hunting, long before he realizes it.
In Summary
- Verbal: someone says the opposite of what they mean.
- Situational: the opposite of what's expected actually happens.
- Dramatic: the audience knows something a character doesn't.