Shirley Jackson's story "The Lottery" has a title that is meant to be both realistic and ironic. It is realistic because there is, indeed, a tradition that is systematically followed in the settlement. This tradition has found no argument throughout the years and has consistently been put into place with no complaints, as we can denote from the avid way in which the settlers take active part of it. Therefore, it is quite acceptable to name this story "The Lottery", as there is a lottery which is about to take place, and in which the characters, main and secondary, participate fully from beginning to end.
What brings the irony to the title, is that the reader will tend to give the semantic meaning to the word "lottery", assuming that it is a chance, an opportunity to earn or win something. In fact, that is precisely what a lottery is: A situation whose outcome is entirely dependant on chance.
This being said, think about the gruesome nature of this particular lottery: Whoever wins gets to be stoned to death. No reason nor rationale stands behind this. No actual purpose does it serve. It simply occurs "because it does", and nobody has stepped forward to argue that it is unnecessary nor that it is morbid and, well, criminal.
Therefore, when we compare and contrast the before and after feelings we get when we read the title, and then read the story, we can really see that the title shifts us to a mood that changes to fear and horror by the end of the tale.
The word "lottery" has a default positive connotation to it because it involves the "winning" of something; nobody ever thinks about the "loss" of anything, which is the irony of Shirley Jackson's short story. Also, in the same story, Jackson uses the third person dramatic point of view, allowing the outcome of the story to remain an even greater surprise. Ironically in the end readers are led to believe everything is okay because we have no clue what the character(s) are thinking at this point.