Cosmic irony is a phrase that is best described by considering the presentation of the gods in a text and how they act in relation to humans. Cosmic irony normally refers to gods who are at best profoundly indifferent but at worst actively antagonistic towards the humans that populate the earth. Cosmic irony can be seen therefore in the way that Oedipus ends up King of Thebes, which is actually his former city where he was born, even though he knows nothing of this, and that although he saved Thebes through solving the riddle of the sphinx, he is actually the cause of a far larger calamity because of his identity and the plague and suffering that this brings upon his city.
In the end, the fate of Oedipus is shown to have nothing to do with his own personal character: there was nothing, after all, that he could do to avoid it. The fate of Oedipus is an example of cosmic irony because it depicts the gods to be cruel and callous individuals who use humans as playthings, as the Chorus suggests in the following speech which comes just after Oedipus enters the stage having blinded himself:
What dark power lept beyond all bounds,
beyond belief, to crush your wretched life?
Cosmic irony is therefore shown in the way that Oedipus has no idea whatsoever at the beginning of the play of who he really is and how this will blight his existence. His fate is unavoidable, and it seems indeed as if the gods have deliberately "lept beyond all bounds, / beyond belief" to "crush" the "wretched life" of Oedipus.