Generally, Irony is the difference between what someone does or says in relation to what is understood about what is done or said. Often times there is a bit of confusion over what is ironic and what is merely coincidental. The two ideas can be easily confused, but there is however, a very distinct difference between what is ironic and what is merely good or bad luck.

Irony takes on four main forms, all of which have more very well defined characteristics:

Verbal Irony

Verbal irony is the use of words to convey something other than, and especially the opposite of the literal meaning of the words, to emphasize, aggrandize, or make light or a circumstance or subject. A common example of this use of verbal irony is the scenario of a man staring out a window looking at a miserably muddy rainy day and remarking, "lovely day for a stroll." This remark is ironic because it expresses the opposite of the circumstances.
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Socractic Irony

Socratic Irony is when a person pretends to be ignorance of something or someone in order to expose the weakness of another's position. Utilized in a debate or argument, one party may feign a lack of knowledge about a topic and thus will make the other party explain his/her position in great detail. In this way one is forced to explain in great detail the topic that is supposedly so foreign to the other person. It is in explaining the topic, that hopefully the person will expose the fallacy or weakness in the position.
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Tragic Irony

Tragic irony or dramatic Irony is employed to heighten the suspense in a given situation. In this form of irony the words and actions of the characters, unbeknownst to them, betray the real situation, which the spectators fully realize. The character speaking may realize the irony of his words while the rest of the actors may not; or he or she may be unconscious while the other actors share the knowledge with the spectators; or the audience may alone realize the irony. A perfect example is in Shakespeare's Romeo and Juliet, when Romeo commits suicide when he believes Juliet to be dead.
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Situational Irony

Situational Irony occurs in literature and in drama when persons and events come together in improbable situations, creating a tension between expected and real results. An example of this would be a scene where a man and woman are sitting at a bus stop and start to converse. The woman divulges some of her deepest darkest secrets. The man listens and advises her, and the woman thanks him and gets on her bus. After she is gone the man takes off his heavy coat to reveal that he is in fact wearing the garb of a priest. The irony lies in the fact that the woman never knew that the man she was talking to was a priest, but the audience does and the reality of what the audience knows about why the man was so helpful and understanding is different from the reality the woman experienced.
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