Irony: Irony is the tension created in our minds when two levels of understanding (two points of view, two levels of awareness)-- one limited, the other less limited—are held in the mind simultaneously. The distance between the limited awareness and the less limited awareness is the source of our sense of irony. All types of irony are built on the tension between two views. The result can be comedic or tragic, but the source is the same.
Verbal Irony: Saying one thing but meaning another; frequently used with sarcasm (speech intended to insult, hurt) but not always. The speaker INTENDS to be ironic, is aware of the irony. Example: "It couldn't have happened to a nicer guy" said when everyone knows the guy is not nice at all.
Situational Irony: When the opposite of what is expected to happen actually happens. This is the situation in which, the expectation is upended by the unexpected. It is the tension between "ought" and "is." Example: It rains on the annual Weather Forecasters Association picnic. It's not just bad luck, because we EXPECT weather forecasters to have the foresight to avoid such a situation.
Dramatic Irony: When a character says or does something ironic is completely unaware of the irony. This occurs on stage much of the time (hence dramatic irony). This occurs when the audience gets the irony (has a less limited view) but the character does not. Remember, in this case, if the character says something dramatically ironic, he/she doesn't know it's ironic, so it's not verbal irony. Example: A character declares, "This is the best day of my life!" while the audience already knows the character is about to be murdered by a character hiding on set.
Tragic Irony: Tragic irony is simply the irony created when the exceptional and mighty hero in a tragedy is destroyed by the very qualities which make him/her great. The hero meets his fate because the gods will not tolerate the hubris (extreme pride) resulting from the hero's exceptionality. This is the irony created when the accomplished and exceptional person falls. Example: Romeo and Juliet are heroic lovers, distinguished by their ability to love completely on a level beyond reason, yet this great capacity for love leads to their destruction.
Cosmic Irony: Closely related to Tragic Irony, Cosmic Irony stresses the destruction of human aspirations by forces beyond our control, yet the gods are absent in this more modern form. Cosmic irony extends to all, not just the heroic, and depicts the fate we all share in a world over which we have little control. In short, we think we are "all that" when, indeed, we are all heading for destruction and we will all lose in the end. Example: We all think on some level "It can't happen to me," but it can and will. When we discover this we get the irony, the cruel joke of our fate. Ivan Illych experiences this irony as he accepts his death.