The example that best describes it is the 1st one; since "dramatic irony" occurs when the audience (readers) understands what's going to happen, and knows about certain characters' actions, or event, and the characters are unaware of it; hence the characters actions go on a different way.
The tactic is used to make the audience more involved; thus it often creates this feeling of being powerless in the readers' mind, to do anything about it.
So the best statement is: "The reader knows that the human neighbors plan to destroy Animal Farm"