I had not encountered the phrase kidding-on-the-square before. Searching seems to reveal a spectrum of opinions as to what it means. It seems distinct to the 'It's funny because it's true' of darker humour.
It seems to be more on a spectrum of 'Haha, only joking' where the joke teller makes a statement that is ambiguously humorous to measure the values of the recipients, or if they are not sure of the values of the recipients.
I think the distinction might be on whether the joke teller is revealing (perhaps unintentionally) a personal opinion or whether they are making an observation on the world in general, which might even imply that they hold a counter-opinion.
Where do you see 'kidding on the square' falling?
(apologies for thread derailment)