Humans are not the only animals who have the ability to laugh. Smiling and laughing have been observed in non-human primate species during social play. This type of behavioral response serves as a signal to the group by spreading positive emotions, decreasing stress, and contributing to the cohesiveness of the group.
Humor-evoked laughter in humans can be divided into these stages. When listening to a joke, the first part of the humor is the punch line, an incongruous ending. Second, your mind begins to problem-solve in order to interpret this incongruity or surprise. Finally, the brain is able to appreciate these steps, which together form humor and evoke a response of laughter.
The neurotransmitter dopamine (a brain chemical) is responsible for allowing the brain to progress through the stages of humor. Dopamine allows us to feel good when we laugh. Some studies have demonstrated an improvement in health for chronically ill patients when they are exposed to funny stimuli. Thus the old adage “Laughter is the best medicine" probably has a note of truth in it.
This answer was provide by Dr. Beth Ann Ditkoff. This and other interesting answers can be found in Ditkoff's book, "Why Don’t Your Eyelashes Grow?: Curious Questions Kids Ask About the Human Body." Republished here with permission.