While similar, irony and sarcasm do not necessarily refer to the same thing. Irony appears in several different forms, including verbal, dramatic, and situational irony. Sarcasm is strictly verbal and can even be classified as a type of verbal irony. A situation can be ironic without being sarcastic, but a statement that is sarcastic must also be ironic.
In general, irony refers to any circumstance that does not mean what it appears to mean on the surface. This circumstance can come in the form of a situation, action, or statement made by an individual, either in a work of fiction or in reality. The truth behind the specific circumstance is usually in complete opposition to the most obvious expectations the reader or listener would have in regards to the circumstance. Although both irony and sarcasm rely on differences between appearance and reality to make a point, irony encompasses a broader range of circumstances.
Dramatic irony, for example, occurs in a literary work when a character makes a statement that applies to his or her situation without the character's realization. If a girl in a story states that no one would dare to steal her bike when, unknown to her, the bike was stolen in the previous chapter, dramatic irony has occurred. In situational irony, an event turns out in a completely opposite manner to what the reader or viewer might expect. A bald man who wins a set of hair curlers as a raffle prize has a situationally ironic circumstance. While the outcome of the situation makes no practical sense, the polar opposition between outcome and expectation makes that outcome seem fitting.
Verbal irony occurs when a speaker makes a statement that means something opposite of what the literal interpretation implies. Sarcasm is the most common, purest form of verbal irony, but verbal irony and sarcasm are not interchangeable terms. Overstatement and understatement also fall under the category of verbal irony. A speaker who says that he is having "the best day of his life" to describe an ordinarily good day uses overstatement, also called exaggeration or hyperbole. Conversely, someone who says that her day is "not too bad" when she is having an extraordinarily great day uses understatement.
With sarcasm, the surface meaning of the speaker's statement stands in direct opposition to the true meaning behind his or her words. Sarcasm is often meant in a bitter, critical manner. For instance, a girl who tells her rival, "I just love your new blouse," when she actually hates it, uses verbal irony and sarcasm in a harsh way. Not all sarcasm is negative, however. A boy who tells a brother, "Mom and Dad will be so disappointed," after that brother aces a test or wins a sporting match, uses sarcasm in a friendly, light-hearted manner.
Regardless of how the speaker or writer uses sarcasm, the truth behind a sarcastic statement always directly contrasts with the literal meaning of the words. Other forms of irony and sarcasm both share a reliance on the polar opposition between truth and appearance. Irony can include non-verbal contradictions, however, while sarcasm only exists within the verbal realm.