Huh, yeah, I think you guys are talking about a different kind of communication from what I'm used to. Embarrassing things? Sure, that happens, and everyone laughs about it and it's a bonding moment because the event and the person are accepted within the group and it's a shared thing.
The way they look, though? I dunno. Especially if it's physical features, that's overboard. If it's some new clothes and you joke about them? Not sure what the big deal is there. You make humorous statements that everyone can laugh at, and it raises the spirits of the group. There is a lot of subtext that goes on in these moments that communicates a large amount of information. It lets you know which issues are sensitive with a person without it being a direct argument, it allows the person to laugh it off and change the subject if they don't want to discuss it, it lets the other person know you noticed something about them and that they're important enough to joke about, etc.
If you're talking about things like, "lol dude you're looking pretty fat today, eat too many pizzas?" then that's pretty different from what I'm thinking. I really get the impression that people are talking about different kinds of things here and generally just talking past each other.