Satire is often defined as a way of looking at people, societies, and institutions that focuses on the failings of those things in order to correct those failings. Satire can be gentle or harsh, but some level of humor is almost always present. Alexander Pope, for example, wrote of the value of satire, "those who are ashamed of nothing else are so of being ridiculous" (Letter from Pope to Jonathan Swift, March, 1732). One of satire's principal aims, then, is to shame a person or an institution (such as the government, the church, a business) into better behavior.
Literary critics often divide satire into two types. The first is formal, or direct, satire in which the satirist usually speaks in the first person ("I") to either the reader or to a character in the work itself--for example, Alexander Pope's "Epistle to Dr. Arbuthnot" is a formal (direct) satire directed to people whom Pope believes have violated standards of proper conduct, and Pope poses as a well-meaning person whose only goal is maintain certain standards. The second type of literary satire is informal, or indirect, and usually takes the form of a narrative or story in which the characters become the objects of the satire because of the things they do or say. Jonathan Swift's Gulliver's Travels is an example of informal satire because the characters satirize themselves through their actions, thoughts, and speech. In other words, we understand they are foolish not because someone tells us they are foolish but because we see and hear their foolishness or improper behavior.
We further divide satire into Horatian satire, which tends to be gentle, good natured, and tries to correct improper behavior by nudging someone in the right direction, and Juvenalian satire, which is characterized by anger, hatred, bitterness--it aims to correct by shaming someone or an institution into better behavior.
Satire, then, is a literary technique used to correct problems in the behavior of people and institutions as perceived by the satirist. In general, Horatian satire, which characterizes much satire written in 18thC. England, is humorous and gentle--for example, Pope's "The Rape of the Lock"--and Juvenalian satire, also quite common, is usually very harsh and angry. Swift's satire of mankind in Gulliver's fourth voyage, although it has some humor, is much closer to Juvenalian satire than to Horatian.