Satire is generally defined as the use of a humor, irony, exaggeration or ridicule to expose or criticize some element of society.  Modern day comedians use satire in much of their stand-up comedy to present satire.  Mark Twain was a master of satire in most of his writing.

In the short story "Luck," Twain primarily uses humor and irony to make the point that our society -- at his time, in particular, though it generally holds true today -- glorifies people as heroes, without always knowing the truth about the person.  And the more someone begins receiving positive recognition, the more it will continue.  The protagonist in "Luck," introduced initially as "Lt. Gen. Lord Arthur Scoresby, V.C., K.C.B., etc., etc., etc.," is a perfect example.  In fact, that introduction alone shows the public's fascination with titles and credentials.  The "etc., etc., etc.," is Twain's way of poking fun at the initials after the person's name, which make him seem important, even though we may not know what they actually mean.  Twain makes the point explicitly in the next sentence when he says, "What a fascination there is in a renowned name!"  Not in the man and his actual, accomplishments -- just in his name.  This is satire.

The story then progresses, with several examples of Scoresby's luck:  the way he passes exams at school, his mistakes in battle that turn out to be lucky successes -- and each time he makes a mistake and gets out of it through luck, the people around him pass it off as a success, giving Scoresby credit for unearned brilliance.  His reputation becomes greater than his actual deeds, and Twain shows that society is happy to accept that.  Scoresby gets promoted over and over, when the narrator (who knows the truth) keeps expecting him to be found out.  In the story's conclusion, the narrator brings it together:  "Look at his (Scoresby's) breast; why, he is just clothed in domestic and foreign decorations.  Well, sir, every one of them is the record of some shouting stupidity or other...."  Twain is using satire to show us that Scoresby's stupidity is mirrored in the stupidity of the society that kept promoting him and, ultimately, honoring him at this banquet.