Dramatic irony is when a playwright creates a situation where the audience is aware of something that the characters in the play are not. Throughout the entire play, the audience is aware that Iago is manipulating the other characters without them knowing. An excellent example of dramatic irony takes place in Act Four, Scene 1. Iago attempts to convince Othello that Cassio has been sleeping with Desdemona by telling Othello to hide and watch as Cassio jokes about his affair with her. Iago tells Othello,
"Do but encave yourself, and mark the fleers, the gibes, and notable scorns that dwell in every region of his face. For I will make him tell the tale anew where, how, how oft, how long ago, and when he hath, and is again to cope your wife. I say, but mark his gesture" (Shakespeare, 4.1.71-77).
In reality, Iago plans to discuss Cassio's relations with Bianca because Cassio cannot help but laugh when he talks about her. Iago explains his plan to the audience by saying,
"As he [Cassio] shall smile, Othello shall go mad. And his unbookish jealousy must construe poor Cassio’s smiles, gestures, and light behavior quite in the wrong" (Shakespeare, 4.1.90-93).
While Iago speaks to Cassio about Bianca, Othello believes that Cassio is laughing about his affair with Desdemona. The audience is aware that Othello is being manipulated as he hides and watches Iago's conversation with Cassio. Cassio is also unaware that Othello is watching as Iago plots against him. After Cassio leaves the scene, Othello immediately asks Iago how he should go about murdering Cassio. Iago also convinces Othello that Desdemona gave her handkerchief to Cassio. Again, the audience is aware that Iago has acquired the handkerchief from Emilia and has placed it in Cassio's room.
Throughout the entire scene, Othello believes Iago's lies and accepts the story of Desdemona's infidelity under false pretenses. The dramatic irony creates suspense as the audience witnesses Iago's evil plans take root and influence the other characters to act upon his lies.
A great deal of the conflict in Othello is driven by what the audience knows but the characters, in particular Othello, do not know. The audience knows that Desdemona is perfectly loyal to Othello and that she works tirelessly in defending and trying to further his interests. Her break from her father in her request to marry him was a demonstration of her loyalty and nothing has changed. But Othello begins to suspect her thanks to Iago's maneuverings.
And Iago's false loyalty to Othello is the most important example of dramatic irony in the play. He says to the audience and to Roderigo that he serves Othello to "do his turn upon him" and to get what he wants and deserves. He fools Othello and Roderigo and Cassio and Desdemona that he is loyal to them and acting out of love. The only person who eventually sees through him is his wife Emilia.
The audience watches helplessly as Othello is destroyed by the work of Iago, as only they share in the knowledge of what Iago is really doing.