When someone "is joking", it means that they're saying something that's not true, in order to be funny:

A: You're quitting? Are you serious? B: No, I was just joking.

You probably also know that "jokes" are little funny stories or sayings that you tell people. When you're doing this, it's called "telling" a joke:

He always tries to tell jokes, but he usually messes them up.