DUNCAN: True, worthy Banquo! He is full so valiant,
And in his commendations I am fed;
It is a banquet to me. Let's after him,
Whose care is gone before to bid us welcome:
It is a peerless kinsman.(65)
In this scene Macbeth has been congratulated by Duncan for his excellence on the battlefield and his help in uncovering the treachery of Cawdor. Macbeth goes ahead of Duncan and the rest to make ready his castle at Inverness for their arrival. When he leaves Macbeth says to himself that he is shocked at his own desire to kill Duncan, his king. The event which has precipitated Macbeth's desire to kill Duncan is that, during this scene, Duncan has invested his eldest son Malcolm with the title of Prince of Cumberland. Since this title is the customary title of the heir to the throne of Scotland, it becomes clear to everyone in the room that Malcolm will be king when Duncan is dead. This makes Macbeth want to kill Duncan quickly, before Malcolm is formally invested with the title, so there will be a much better chance for Macbeth to take the throne from him.
Directly after Macbeth has these thoughts of killing Duncan in order to steal his throne from his son, Duncan, unknowing, makes this speech about the worthiness of Macbeth. Duncan says that by commending Macbeth he is "fed", that is, nourished and sustained in his kingship. The fact that Macbeth will be the one who feeds Duncan his last meal is particularly ironic. It is after the aforesaid "banquet" that Duncan will be murdered.
But the most ironic line is the last, describing Macbeth as a "peerless kinsman." This is dramatic irony, since Macbeth will be the one who kills him. Duncan does not know that he is complimenting his future murderer. There is also an element of the pun in the word "peerless". First, it can mean "without equal", meaning the best. In Duncan's mind Macbeth is peerless because of his service and virtue. But, in reality, Macbeth is also peerless because no other of Duncan's kinsman desire to kill the king. The word "peer" is a term for nobility, so it's a foreshadowing of Macbeth's future kingship. When Macbeth is king of the realm, he will indeed have no peer; he will be the highest ranking man in the land. Duncan is duped into believing that this "peerless kinsman", his loyal soldier and subject, whom he has recently honored with an additional title of Thane of Cawdor, is has true as he appears. We, the audience, know that he is not. This is why this speech is an example of dramatic irony.