He who sits in the heavens laughs; the Lord holds them in derision.  Then he will speak to them in his wrath, and terrify them in his fury, saying,  “As for me, I have set my King on Zion, my holy hill.” (ESV)
We know that God laughs. In fact, we should know that God has a sense of humor; he created us! Generally speaking, we think of God laughing as a positive thing. We think of God being the source of all joy and so it is natural to consider laughter coming from him. In fact, I fear that many of us have a picture of God as some kind of gentle old man in the sky. But, in this Psalm we find a very different concept of laughter coming from a sovereign God.
In verse 4 the Lord of all Creation is laughing in mockery at the kings and nations who have taken a stand against God and His holy law. While he is laughing it is certainly not in fun. He does not view rebellion lightly. His response is one of wrath and terror. He establishes his kingdom in Zion. That would have meant Jerusalem for the Old Testament reader. David was established as that King, and of course, Jesus, God's Son would be known as the Son of David. He is King forever.
There are some things for us to take away from God's laughing at the rebellion of man. First of all, we need to make sure that we are never in a position where we are actively working against God's clear direction from His Word. We may have difficulty understanding why God does what he does. We may not even like what he has commanded. But to rebel against him is to receive his wrath. That is not a laughing matter.
Secondly, when we are overwhelmed by all of the evil scheming of men and even of nations around us, we need to look at it from God's perspective. He is a sovereign, all-powerful God. He is in complete control. He is not unaware of the evil we see. He is also not intimidated by it. He mocks the foolish efforts of man. His wrath will come for those who walk in disobedience. Just keep your eyes on Him.
God's laughter can be joyful. When it comes to man's rebellion his laughter is not funny. Be sure that you are not walking in rebellion to God's Word. It is not a laughing matter.