Freud believed that we laugh when we think about "forbidden thoughts", thus liberating ourselves with an outburst of energy known as laughter.
Theory: The earlier theories do
not address why feelings of superiority or incongruity should call
forth such an exuberant physical reaction. An advantage of the
relief theory--proposed by Freud--is that it at least tries
to explain the causal link between humour and
laughter. According to Freud, there are powerful censors in
the mind that form unconscious barriers to prevent us
thinking about "forbidden thoughts". In this view, the
laughable (ideally, a naughty joke) liberates the laugher
from inhibitions about forbidden thoughts and feelings. The result
is a discharge of nervous energy that distracts the inner
censor from what is going on. Freud suggests that the release
of this energy is a pleasurable experience as demonstrated by the
good feeling that laughter provides.
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Without a tool such as humor, our conscious mind would not allow us to talk or think about the "forbidden" subject dealt within the joke. Freud regarded humour as a means of outwitting our internal censor. We are allowed to indulge in forbidden thoughts if it is first disarmed in some way. An insult may seem funny if it is first of all posed as a compliment. In addition, laughter has the function of releasing nervous tension that results from thinking/talking about these "forbidden" subjects.
Freud also suggested that jokes as such are usually short things with double meanings. This is to fool the simple censors, who see only surface meanings and fail to penetrate the disguise of the forbidden wishes. Freud's theories seem to work best for humorous aggression and sex related jokes.
The censorship theory explains why a joke is not so funny if you've heard it before. This is because a new censor has been constructed, or an old one extended. Novelty is therefore a key component in the telling of a joke that others consider "funny."