I must not, however, omit to remind you that this term in modern phraseology has fallen very far below its primary meaning, and is often so taken as to designate nothing more than a mere playful mockery. In its original Socratic sense, however, such as it is found in the whole series of the thought and the internal structure of Plato's dialogues, where it is developed to its fullest measure and proportion, irony signifies nothing else than this amazement of the thinking spirit at itself, which so often dissolves in a light, gentle laugh. And this light laugh again oftentimes beneath its cheerful surface conceals and involves a deeper and profounder sense, another and a higher significance, even the most exalted seriousness. In the thoroughly dramatic development and exposition of thought which we meet with in the works of Plato, the dialogical form is essentially predominant. Even if all the superscriptions of names and persons, all forms of address and reply, and, in short, the whole conversational garb, were taken away from it, and we were merely to follow the inner threads of the thought according to their connection and course, the whole would, nevertheless, remain a dialogue, where each answer calls forth a new question, and the eddying stream of speech and counter-speech, or, rather, of thought and counter-thought, moves livingly onward. And unquestionably this form of inner dialogue is, if not in every case equally applicable and absolutely necessary, still it is all but essential, and at least highly natural and very appropriate to every form of living thought and its vivid enunciation. And in this sense even the continuous unbroken speech of a single person may also assume the character of a dialogue.
Friedrich Schlegel, The Philosophy of Language, p. 381. Irony plays a significant role in Schlegel's thought, and partly due to him in a lot of Romanticism. As he notes here, he doesn't mean it as a relative of sarcasm, but in the sense of Socratic irony. It is by irony that one recognizes the gap between one's words and one's ideas, it is by irony that one recognizes one's own ignorance, it is by irony that one recognizes one's own liability to inconsistency. But it is not a negative state; as Schlegel calls it here, it is the "amazement of the thinking spirit at itself" and he has previously called it "the highest intellectual clearness and brilliancy". This irony is something that can be obtained only by seeing the two-sidedness of our thought -- its excellences and its absurdities, its sublimities and its limitations -- and thus is naturally only found dialogically, by our ability to think along two interacting lines, whether it is with the help of another person or by a sort of inner dialogue.
One of the things Schlegel associates with irony is genuine love; the irony of love is seeing the finiteness of the beloved along with the infinity that love associates with them. All love is to some degree ironic, and in pure cases, the recognition of the inconsistency can intensify the love.
