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According to Gen-X heartthrob Ethan Hawke's slacker alter ego Troy Dyer, irony can be defined as "when the actual meaning is the complete opposite from the literal meaning." Okay, okay, so Reality Bites might not be the fount of all wisdom, but you have to admit that he's right when it comes to irony… well, almost.
Irony comes in many forms, most of which do indeed have to do with contradicting actual and literal meanings. Verbal irony, for example, has to do with the tension between what is said and what is really meant. You've probably used this more than a little in your own life, like when you say, "I'm fine," when really you mean just the opposite. Liar.
Situational irony, on the other hand, plays with the difference between expectations and reality. Rather than explain this one, Shmoop's going to tell you a story:
He and his wife were touring Sarajevo when a group of assassins tried to bomb his cavalcade. The bomb bounced off and rolled under another car, but Ferdinand freaked and insisted they deviate from their planned route. Because of this change, his driver got lost, and they wound up right outside a deli where the final assassin, after learning about the unsuccessful plot, went to drown his sorrows at the bottom of a sandwich. The assassin stepped out of the deli, saw the car, and killed Ferdinand with the "shot heard 'round the world." Well, one of them, anyway.
Did you catch the irony? Ferdinand flipped out because of the bomb scare, but the assassins gave up after it failed. If ol' Ferdo had just stayed the course, he never would have ended up outside that deli within pistol-range of Gavrilo Princip, the mopey assassin who hit a major streak of luck. Yep, that's situational irony.
Dramatic irony is when the audience knows something—usually a lot of things—that the characters don't. Remember You've Got Mail? Wake up, Meg Ryan: Tom Hanks is that very same dude you've been chatting it up with online, and he doesn't look like a Clark bar. To be fair, he doesn't look like Clark Gable, either. Sorry, Tom.
Irony can be funny, but it's not, by any means, the same thing as comedy or satire. It often gets used for comedic effect, but some irony is downright tragic (like the fact that Meg Ryan doesn't know she's looking her true love right in the eye).
To see irony in action, check out our analysis of verbal irony in Jane Austen's Northanger Abbey and Emma, dramatic irony in William Shakespeare's A Midsummer Night's Dream, and situational irony in O. Henry's short story "The Gift of the Magi."