When a small group of people make up a joke (a phrase) while no one else is there (Sometimes because of an event that occurs, and then someone says something and it becomes an inside joke) and don't tell anyone about it, so every time anyone (whether from the group or not) says the phrase, they all start laughing like idiots for an unknown reason. It completely baffles people outside this group why it would be remotely funny. Most of the time it confuses them, or annoys the crap out of them.
Jeff started cracking up for no reason when I said "jelly"
Person 1: So I spread mayonnaise on my turkey the other day...
Person 2: Ahaahaahahahah!!! MAYONNAISE!!!!
Person 1: Wha-
Person 3: DID HE JUST SAY MAYONNAISE??!! AHAAHHAHAHAHAH
Person 1: Um??
Person 1: I checked out books from the library for my little brother, he seems to like The Very Hungry Caterpillar
Person 2: HAAHHJHSHJAHJDJHGGJDG HAHAAHHAHAHHA S SHAHAHAHAHAHHA
An inside joke is something used to exclude others out of conversations and to strengthen one's own friendship, which is why humanity is extremely selfish. However, others can be included, but they feel awkward.
"I'm going to eat curry with some more curry and pizza when I fly on this airlines called Fly Curry Curry Pizza 2.0. The airlines is a group of people meant to manipulate several people for one's gain and basically serves various kinds of food, including curry and pizza. It's imaginary, but you know where this inside joke comes from since you are my friend." -friend #1
"Hahahahahahahaha! The airline also gives free ipads in-flight and donates to various countries and is very cheap!" -friend #2
"I'm gonna walk the dog now. Then I'm going to take over the world because of modern day politics." -random person
a joke made by 2 or more people that only that group understands! even if you explain it to other people they might not find it as amusing as you would.