How is irony used in "Ozymandias"?   

The central piece of irony in this poem is that the statue of Ozymandias was constructed to show off his power and grandeur, but when the poem's narrator stumbles across it (in what seems to be much further in the future) it is mostly ruins in a remote desert. The poem highlights the reality that all of humankind and our creations are ephemeral. No matter a person's status or power in their day, they will eventually perish.

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"Ozymandias" by Percy Bysshe Shelley is a poem told by an anonymous narrator who encounters a traveler who tells of a fallen and shattered statue in a remote area in the desert. The statue is of Ozymandias (also known as Ramesses II or Ramses the Great). The irony is situational.

The point of the statue is to emphasize the greatness of the Pharaoh and the way his works and his fame, like the stone of the statue, will endure forever. That expectation is reflected in the inscription: 

Look on my works, ye Mighty, and despair!

The pharaoh and his kingdom have both dwindled to the point that they are only remembered as curiosities by idle tourists and inspire thoughts about the nature of art and the skill of the sculptor rather than awe and despair in response to the pharaoh himself. In fact, the main lesson of the statue is that art outlasts its subject, but even so all humans and their creations are ephemeral in nature, subject to decay and corruption. 

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The narrator of Ozymandias by Percy Bysshe Shelley is obviously well-traveled and interesting as he comes from "an antique land," suggesting that he is perhaps mysterious and exotic and seemingly knowledgeable. He   reflects on the scene before him and immediately recognizes the irony in what is left of "Ozymandias, king of kings..." in the form of his broken and derelict statue. Far from reflecting his grandeur, Ozymandias's statue is a testament to his pride and arrogance and it is ironic that even the sculptor could see it when he was working; to the point that the sculptor sculpted the " frown, And wrinkled lip, and sneer of cold command,..."

Further irony is present as, the king (Ramses II), does not even recognize it in the finished product; when the sculpture is completed. He is far too vain. The king thinks that the sculpture reveals his greatness to the point that other significant rulers whom he calls, "the Mighty," will "despair," as they cannot match his importance. Ozymandias is also convinced that he will be remembered in history as a great ruler whereas, in fact, he is exposed as a tyrant.

The fact that the "shattered visage," still exists but only to discredit him and lies apart from, "Two vast and trunkless legs of stone..." adds to the mocking tone of Shelley's poem. They, the stone blocks, are imposing but, without a head, they signify nothing and it is fitting that such a manipulative king should suffer this fate. The statue becomes offensive and, "a colossal wreck" suffering "decay." There is nothing majestic in these descriptions.

The words on the inscription intensify the insult because anyone who  looks "on my works," will be less than impressed with what surrounds the statue; noting more than, "The lone and level sands," which are "boundless and bare."  

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The central irony in this poem is that Ozymandias's statue was intended to project his greatness. But when the onlooker sees it, it is not only shattered, but it lies in the midst of a wasteland. There is an inscription on the statue, which reads as follows:

My name is Ozymandias, king of kings; Look on my works, ye mighty, and despair!

This inscription, however, seems ludicrous in its modern surroundings. Rather than making the onlooker contemplate the majesty and power of the great Ozymandias, which was its intent, the inscription and indeed the entire scene leave one contemplating how short life is, and how time makes victims of us all. So, ironically Ozymandias's statue has exactly the opposite effect that the king intended.

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