What is dramatic irony?

when a character says one thing but means another

when a character makes fun of another character without them understanding

when the audience knows something the characters do not

a gentle correction made by playful teasing

Dramatic irony is when the words and actions of the characters of a piece of literature have a different meaning for the audience than they do for the characters. In a comedy, for instance, the dramatic irony might be in the form of a misunderstanding between the characters that creates a comedic situation. See Shakespeare's Comedies for that. There can be 'situational irony' and 'verbal irony' too. The effect is to make the readers or the audience smile.