Oliver Wendell Holmes wrote this poem as a student when he was just twenty-one years old. He had read in the newspaper that the U.S.S. Constitution, nicknamed "Old Ironsides," would be decommissioned. He wrote the poem to protest that action. In fact, the Navy wasn't considering decommissioning the ship at that time, but after public outcry in favor of the ship due to repeated printing of Holmes's poem around the country, the Navy ended up using the ship until 1881. In 1905, when the Navy suggested the old ship be hauled out to sea and used for target practice, public sentiment prevailed again, and the ship is now preserved as a museum.
Verbal irony is when the words used signify an opposite meaning to what is really intended (sarcasm is an example of verbal irony). In the first line of this poem, the poet says, "Ay, tear her tattered ensign down!" To tear down the ensign of a ship would be to decommission the ship and retire it from active military use. This is what Holmes thought the Navy intended to do, but he was not in favor of that action. He makes this statement ironically—we might say sarcastically. It would be like saying, "Sure, go ahead and put this famous ship out to pasture." The rest of the poem goes on to laud the ship's famous actions in the War of 1812 and to suggest that a more honorable fate for the vessel would be to sink her. Even that recommendation is verbally ironic. What the speaker obviously wants is for the Navy to repair the ship and continue to use her, which would be the most fitting way to honor her prior service. That is exactly what happened.