The essence of irony is opposition. The setting in Jackson's "The Lottery" is ironic because what the story suggests, and what the reader expects of the setting while reading (normal village with normal people who do normal things) turns out to be untrue. Opposition, or opposites.
The speaker of the story achieves this irony by revealing only the normal, until it is time to show the reader the abnormal. For instance, the reader is not shown character thoughts. If he/she were, the horrifying effects of the ending would be largely eliminated.
The calm and normal of this setting is what makes this situation seem so terrible.
It is the irony of the story that brings about a grander purpose. This isn't so much about a town wherein this vulgar act actually happens, it is more about us.
We have rituals or routines that we observe regularly because we are used to always doing them. To us, we cannot see the absurdity of these acts because we have been doing them for so long and in our lives' settings, these seem normal.
These folks can't see that the lottery is wrong. The setting perpetuates this because all of the acts that they do (wash dishes, enjoy the nice summer day, play by the rock pile, shoot the breeze) are normal. The lottery is just an annual part of that normal. The irony of this story is the literary device used to make the reader think and consider their own life.
The irony of the setting is that it is a lovely, peaceful village with all sorts of people who seem very normal. It seems like the kind of place you would want to live and the kind of people who you would like to have as your neighbors and friends.
But then, in this nice place, we find out that something horrible is going on. This is ironic because it is something that is totally unexpected. You do not expect to see something this horrible in such a nice, beautiful setting.
The setting of Shirley Jackson's "The Lottery" is a beautiful June day and it is out of keeping with the fact that what takes place on the town green is a ritual murder. The setting is one of the elements that make the story more horrifying. By using an incredible amount of irony, including the setting, the story is much more dramatic and powerful and more than drives the point home: that following blindly a tradition that no one seems to remember why they do it, can have drastic effects.
The irony in the setting reveals the purpose of the story. The story’s very outrageousness raises questions about unexamined assumptions in modern society. Do civilized Americans accept and act upon other vestiges of primitive ritual as arbitrary as the one Jackson imagines? Are we shackled by traditions as bizarre and pointless as the lottery in Jackson’s story? What determines the line between behavior that is routine and that which is unthinkable? How civilized in fact are we?