O. Henry's tale of the fated reunion of two old friends after twenty years involves some surprising contradictions. The most prevalent type of irony is that of situational irony, in which there is an event that occurs a direct contradiction of the expectations of the reader. In addition, there is verbal irony, words used to suggest the opposite of their usual meaning.
When the policeman on his beat sees a man standing in a doorway, he approaches and the man explains that he is waiting for an old friend, whom he has not seen in twenty years. The policeman notices the man's diamonds and remarks, "Did pretty well out West, did you?" and the stranger replies, "You bet!" While the policeman is apparently admiring the man's diamonds, he actually is noting the identity of this stranger.
Then, he tells the man in the doorway, "I hope your friend comes around all right." Since he is actually the "friend," the policeman means other than what he says.
When the man that 'Silky' Bob walks with the man who comes to meet him, he believes it is Jimmy Wells. However, when the two men pass under the bright light of a street corner, Bob realizes that the other is not his old friend Jimmy. Then, the undercover policeman informs Bob that he has been under arrest for ten minutes because Patrolman Wells has identified him, but does not have the heart to arrest his old friend himself.