Friendly teasing is one use of sarcasm. Let's say you got an A+ on a test and your friend says " I can see that test was really hard for you!" It's a close friend that says it to you, they smile as they say it. You can assume they are just gently teasing you in a friendly way.

People also use sarcasm to try to get another person to stop doing something. You're on the phone in a public place and someone says "Why don't you talk a little louder next time, the whole store didn't hear you!" This is an indirect request for you to speak quietly. You figure this out by using your eyes and looking at the person who said it. Look at their facial expression and body language. Do they look angry or annoyed? Go into you social memory and general knowledge and think about what the expectations are in a public setting. It''s expected that your conversations are kept private and therefore you should be speaking softly or not using the phone in that setting.

Sarcasm can also be used to make fun of someone. Your dressed differently than you typically do and someone comments "WOW, I love what you're wearing!" How do you know if they are serious or being sarcastic? Think about what you know about the person. Is this person usually friendly toward you? Look at their facial expression, body language and listen to their tone of voice. Was there a 'sneering' quality to the voice or did they sound friendly and kind?

Sarcasm can be really confusing but its a tool that people use all the time. They key is being able to figure out if someone is being mean or friendly.