An inside joke is a joke formed between two or more people that no one other than those few people will ever understand until you explain it to them. And even when you do explain it to them, they may get the joke but may not find it even remotely amusing. People generally find inside jokes annoying, as the joke makes absolutley no sense on its own in any context. I find that most of the stupidest ones that have been formed by own group were formed by accident. Perhaps that is why most of them make absolutely no sense.
However, the inside joke can backfire. In one instance, two people can have an inside joke, and a third person finds out about said joke. Then, the third person find it even MORE funny than either of the two who formed in the first place. Truly annoying.
I have about 100 or more inside jokes formed between me and one particular friend alone. We even have an inside joke about how someday every word we say is going to be an inside joke. Which, someday, may occur.
Random person: Yeah, so I went to the pet store, and there were some bunnies there. They were really cute.
Group of friends: BUNNIES ON THE CEILING! AHHHHAHAHAHAHAHAHAHAHAHA!!!
Random person: What?
*inside joke is explained*
Random person: Oh. Well, uh, that's not THAT funny.
Group of friends: Yes it is! AHAHAHAHAHAHA!!!
Random person: Uh, ok... *backs away slowly*