I have often made the case for humor as both a means to achieving a bit of transcendence from the insularity of self and as an indication of that transcendence. I was thus pleased to see James Sellmann's contribution ("Transformational Humor in the Zhuangzi") in Wandering at Ease in the Zhuangzi. He makes the case that a prominent aspect of Zhuangzi's writing style is to expose the humor inherent in the human condition so as to facilitate a loosening of the bonds of conventional thinking that entrap us into fixed and static positions in an ever-changing reality. He quotes Wu Kuang-ming (The Butterfly as Companion) to make this point: "Irony and laughter loosen (chieh) us to such stirrings to the new. To laugh is to see beyond the transitoriness of events; laughing at oneself liberates the self into self-scrutiny. . ."
Irony, Wu goes on to say, is a kind of "double talk" which models and helps to facilitate the "double walk" (lingxing) which is variously translated "walking two roads" or "going both ways". Irony shows us how that nothing is truly reducible to easy, cut and dry, answers. It keeps us on our toes when attempting to 'explain' reality. It keeps us "unfixed".
A classic example of irony is seen in the story of the Greek general who, on the eve of a great battle, asks the Delphic Oracle what the outcome will be. "There will be a great victory," he is told and thus confidently goes on to suffer a great defeat. He failed to understand that victory and defeat depend upon one's point of view; the Oracle could have just as easily said there will be a great defeat and the general could have just as easily understood this to be descriptive of his opponent's outcome. Here, irony teaches us perspectival relativism.
Irony essentially reminds us that life is paradoxical, which is to say that it can only be lived, not understood.
Similarly, if we cannot laugh at ourselves, we are clearly unaware of our own self-inflicted bondage to fixed ideas. To laugh at oneself is to at least be aware of oneself as a bundle of contradictions. Seriousness to a fault makes us a plague to ourselves and to others.
Sellmann believes of laughter that, though "a vehicle to transformation and liberation", and though "one must certainly practice the method of liberation over and over, again and again", "eventually one can let go of the practice . . ." I am not so sure; nor do I think that Zhuangzi would agree. Life is always unfixed and essential chaos, and thus it's always all a wandering, a playing, a laughing. There is never a means that is not also the end. Nor does Zhuangzi ever fail to laugh at his own explanations.
You can check out Scott's writings on Zhuangzi here.