Can this word amount to a form of sarcasm?
Yep. Here is a typical use 「中国製2万円ガイガーカウンターの“高性能”に専門家苦笑」. Here is an example in spoken language:
Usually in spoken language, you pronounce it as にがわらい probably because it's harder to misunderstand, but the internet abbreviation ((苦笑)) is usually pronounced くしょう. In written language, both にがわらい and くしょう is common. Both have identical meanings unless you are a novelist or something ;). It is commonly used in both written/spoken language.
Women may less frequently use 苦笑 in a way that mocks other people, but this is secondary to a general tendency (due to women being socially expected to be less aggressive) and is not specific to this word. I think it's fair to say both gender use it in the same way.
Social significance... Personally I think 苦笑 is a very "Japanese" word. There is also an extremely common emoticon
(^^;) or also
（汗） which can be used (almost) interchangeably with 苦笑. As you can see, it depicts a person smiling, but sweating at the same time. According to this undergraduate paper, these kind of emoticon is second most frequently used (most frequent being the simple "smiling" emoticon). So it definitely appears to be a very important emotion in the Japanese language. I myself use this emoticon a lot. Yet when I think about it I can't think of a good parallel in US, Germany. It could be an interesting study.
I think Flaw is onto something with his/her analysis, although I don't think the primarily, intended meaning is "smile to appear within social norms". Perhaps it's more accurate to say that this word is used to appear within social norms.