One of the most direct examples of irony in "The Lottery" comes from the connotation associated with the word 'lottery.' Most people would associate winning a lottery with receiving a fabulous prize or millions of dollars in cash; the term 'lottery' usually has a very positive connotation. The end of the short story strikes the reader as being very ironic, because in this instance, winning the lottery does not equate a grand prize, but rather a gruesome death by stoning.
Shirley Jackson's story is all about the unexpected; she lulls the reader into a false sense of security with the seemingly positive setting, the quaint small town with its farmers discussing plows and the wives in their "house dresses with sweaters." The setting makes the reader feel comfortable and relaxed, never supposing that this seemingly sweet town could host such a brutal tradition. The setting is definitely another ironic twist in the story, driving home the point that even seemingly good people can contribute to something horrible for the mere sake of tradition.