Saying the opposite of what you mean - and expecting your listener (or reader) to understand the real message underneath.
Verbal irony is when a speaker says one thing but means the opposite. It's broader than sarcasm, though sarcasm is its most well-known form. Where sarcasm aims to wound or mock, verbal irony can be playful, affectionate, or even tragic. A character looking at a catastrophic mess and saying 'Well, that went perfectly' is using verbal irony. The words point one direction; the meaning points the other.
Verbal irony is one of the fastest ways to reveal character. How someone uses it - whether they're biting, gentle, self-deprecating, or cruel - tells the reader volumes about who they are. It also makes dialogue feel real, because people use verbal irony constantly in everyday conversation. If all your characters say exactly what they mean all the time, your dialogue will sound flat and robotic.
Austen's narration is steeped in verbal irony. Her famous opening sentence presents a societal assumption as universal truth while clearly mocking it.
The entire essay is verbal irony on a grand scale - Swift proposes eating Irish babies with deadpan sincerity to expose England's callous treatment of Ireland.
Not everyone uses verbal irony the same way. Some characters should be earnest, some dry, some cutting. Differentiate your dialogue voices.
In conversation, tone of voice signals irony. On the page, you need context, body language, or the situation itself to signal that a character means the opposite.
Sarcasm is just one flavor. A mother gently saying 'Oh, you're so grown up' to her toddler who just put their shoes on the wrong feet is verbal irony too - but it's affectionate, not cutting.
Write a dialogue scene between two characters where one uses verbal irony consistently and the other takes everything literally. Don't use dialogue tags like 'she said sarcastically' - instead, rely on context and the literal character's confused reactions to signal the irony. Does the humor or tension emerge naturally?