[edit] StepsThink beyond jokes. Jokes can be funny, but being funny is about much more than being able to tell jokes. While jokes are a valuable addition to your funny replertoire, if you simply repeat jokes that you've heard, you're not so much being funny as repeating something that somebody funny thought of. That said, joke-telling is an art itself, and there are good joke tellers and bad joke tellers. Most of the following steps can be applied not only to becoming funnier overall, but also to becoming a good joke teller.
Broaden your base of material. In everyday conversation, being funny is mostly about having something funny to say about something that comes up in the course of the conversation. Sometimes this can be a prefabricated joke, but more often you're on your own, and if you're to have any hope of thinking up something funny, you've got to know something about the subject of the conversation--the more you know, the better. If you know a tremendous amount about 17th century poetry, you've probably got a good chance of saying something funny when that comes up in conversation. Unfortunately (or maybe fortunately) 17th century poetry doesn't come up much. As a general rule, people who are very focused on one hobby, occupation, or sitcom are often very funny to other people who are also wrapped up in that particular pursuit. When they try to be funny around people who are not "in the loop," however, their humor often falls flat. In other words, they may come off as "geeks" or "nerds." How do you avoid this? Broaden your horizons so that you are tuned-in regardless of who you're speaking to. If you can find the humor in physics and Paris Hilton, for example, you're well on your way. In a way, being funny is simply showing that you are intelligent enough and know enough about something (hopefully a great many things) to find the humorous nuances that others miss.
Learn from the best. In the same way that good writers are almost always prolific readers, really funny people usually are familiar with the techniques of other funny people. Watch funny movies and shows, read funny books, and go see some stand-up comedians. If you have very funny acquaintances, pay attention to what makes them funny. Immerse yourself in humor and you'll develop a toolbox of techniques you can use to be funny.
Be observant. While knowing a lot can increase your capacity for humor, there's no substitute for seeing a lot. In fact, many very knowledgeable people are rather unfunny, mainly because they fail to see the humor in things. Look for the humor in everyday situations, and see what others don't. This brings up the old question of what is funny. Unfortunately (or maybe fortunately) researchers have looked at this and haven't found any hard, fast rules. There is some consensus, however, that the humor response is similar to the fear response, and thus the unknown, the surprising, and the incongruous are often funny. You can find these by looking, for example, for connections between dissimilar things or by looking for the unexpected in the familiar. On a more basic level, just pay attention to what people around you are saying and doing.
Know your audience. As step two suggests, different people find different things funny. You can, of course, be funny to yourself, but if you want to be funny to other people, you need to have at least some idea of what they find funny. When you're in a group of people you don't know, for example, just listen to what subjects they talk about and what makes them laugh. Generally the better you know someone the easier it will be to make them laugh.
Be quick. People can appreciate even a slightly funny comment if it's said at the right time (usually as soon as possible after the event that precipitated the comment). If you wait too long, however, even very funny comments will lose their impact. For example, if someone says something to you and you think of a witty comeback two hours later, you're probably better off just keeping it to yourself. It won't be funny anymore, and you'll look slow.
Develop a comedic persona. Be yourself. You can't be all things to all people, so you should develop your own unique brand of humor. In other words, learn from comedians and friends, but don't try to duplicate them (unless you're doing impressions, which can be funny).
Forgive yourself. Sometimes a joke will fall flat, or an observation that cracks you up will just make others groan. Don't be discouraged. Learn from your comedic errors, and keep trying. Even the highest paid comedians don't always get a laugh, and no one expects anybody to be funny all the time. If you feel like you're temporarily off your game, though, don't try to force humor.
Take it easy. Don't tell 10 jokes over a 2 minute period. Be conservative and tell the jokes at the right time.