Lampshade hanging

The lampshade effect (also, hanging a lampshade or hanging a lantern or simply lampshading) is a technique used in many forms of drama and fiction to deflect attention from implausible plot developments, evident stage techniques or faulty writing by having a character explicitly draw attention to them. Dating back to the beginnings of novelistic writing and modern theatre, it is a basic trope of metafiction and a simple means to maintain the theatrical fourth wall between actors and audience by temporarily suspending it.
History
In theatre, the technique was popular on the Elizabethan stage. In Shakespeare's Twelfth Night, the character Fabian, after being asked by Sir Toby Belch if his current situation was possible, replies: "If this were played upon a stage now, I could condemn it as an improbable fiction" - a classic example of lampshading. In fiction, it was used in the earliest novels, in which ironic self-referential effects were popular. The highly metafictional 1759 novel Tristram Shandy by Laurence Stern uses the device repeatedly (and could be described as a novel-length application of lampshading).
Rationale
If something unusual happens in a story, the audience tends to fixate on it, ruining their suspension of disbelief and enjoyment of the work. The solution is to "hang a lampshade" on it - have a character point out how strange or unlikely it is. Once acknowledged in-character, the audience is theoretically more likely to accept it.
More generally, it refers to defusing a flaw or improbability by mentioning it in passing, in a way that will cause the audience subconsciously to feel that it has now already been addressed, even if it was merely mentioned and not addressed at all.

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