My brothers and I get our humor from our Dad's side, where coming up with the off-hand, one-line witty comment is a form of sport. My mother's side is much more the memorize-a-joke type. Family events with that side is an exercise in bearing through an onslaught of jokes that you've likely heard before or didn't want to hear in the first place.
The first key to dry witty humor is speed--in conversation, after a statement is made, one has a split-second to come up with something and spit it out or it's not worth saying. For me, this has become almost reflexive.
The second key is the deadpan delivery--after the line, one must remain relatively serious. The deliverer can't "push his own joke" by trying to instigate laughter by laughing himself.
Back in the Midwest, I never really had a problem with people understanding when I was and was not joking. This style of humor is simply endemic to the region. Letterman and Carson are from from Indiana and Nebraska. On public radio, think of Wisconin's Feldman's Whad'ya Know? or Minnesota's Keillor's Prairie Home Companion. Feldman's career is based on the wise crack. In Keillor's funniest moments, he's delivering the material with the utmost earnestness and sincerity.
Sometimes on the weekends, I force fellow car occupants to listen A Prairie Home Companion. They don't get why it's funny.
Now, living in California, I find there to be a bit of a humor barrier. Much too frequently, one of my comments will result in a blank stare back at me. Oftentimes, people don't understand that I'm joking; they wonder why I would say such an odd and random thing. Sometimes, they begin debating me on the point. I have to then stop them and explain that I was being sarcastic--I didn't mean what I said.
This has become a minor annoyance in my day-to-day life.
That, and I'm amazed I can't remember the last time I caught one of your jokes! Please blog more 'incidents'. :D