O'Connor uses a specific kind of understatement know as "litotes." This is where an author presents things subtly, thereby forcing the reader to reach for the meaning, and come to his or her own conclusions about some issue.
Exaggeration is just what it sounds like. O'Connor called her exaggeration "distortion." Her characters aren't necessarily mean to represent "real" people, but rather are meant to have extreme characteristics.
The type of irony most often employed by O'Connor here is "dramatic irony." Dramatic irony occurs when the readers know things the characters don't or can't know. This literary strategy allows the work to comment on things outside of the characters' knowledge.
Here's an example of how these three aspects of her style work together in this story:
Mrs. Shortley had the sudden intuition that the Gobblehooks, like rats with typhoid fleas, could have carried all those murderous ways over the water with them directly to this place. (1.10)
Mrs. Shortley's vision of immigration and immigrants in general, and of the Guizacs in particular, is distorted. She compares them to animals, implying that they are less than human. This creates sympathy for Mr. Guizac, and encourages us to take some kind of stand on Mrs. Shortley's position. The passage is understated in that it doesn't tell us what we are supposed to think about her statement, or how it's supposed to make us feel.
The passage makes use of dramatic irony in two ways. Mrs. Shortley is using the same language to describe the Guizacs as the Nazis used to describe Jews and other people they felt were different. It's ironic that perhaps she, not the Guizacs could have "murderous ways" or at least potentially does.
The dramatic irony deepens when Mr. Guizac is murdered that Saturday morning. Being also dead by this point, Mrs. Shortley can't know that what she accused the Guizacs of doing was played out on Mr. Guizac by her own countrymen.
This also points to her lack of historical knowledge. A good grasp on history reveals that "murderous ways" have been present in society for as long as we can remember, most often for the same kinds of reasons they are present on Mrs. McIntyre's farm – irrational prejudices based on race, class, language, or religion, to name of few of the big ones. By using understatement, exaggeration, and irony, O'Connor argues that it doesn't have to be this way.