Is my baby able to understand humor?

Yes. Even at very young ages, babies understand laughter and humor.
Yes. Babies can't understand jokes like adults, however they can respond to smiles, laughs and funny noises. Babies will imitate these sounds and will often laugh at seemingly mundane things (like ripping paper, silly faces and blowing bubbles). All these things help them develop social skills and language.
Yes. "laughter is the best medicine." how many times have we heard that? It is also is positive energy and projects a sense of happiness. Babies respond to this kind of energy and information. Babies learn to imitate early so yes they understand humor...As well as sadness, anger, and other emotions. Babies respond well to the language of love and humor is one of those.
Yes. Having a sense of humor is a human trait. It changes as a person's brain and personality changes over his lifetime. What is funny to a 1-year old is not funny to a 10-year old, what's amusing to the 12-year old is not funny to the 2-year old, etc. . . Some babies laugh more easily than others, just as some adults have a great sense of humor while others not so much.
Yes. What she understands perfectly is that you are amused, and that tickles her pink! it'll be a while till she figures out what, exactly, made you laugh, but she'll be happy to share the laughs, regardless.
No. While you're baby may not get your silly knock-knock joke, or understand a punch line on your favorite tv show, he/she can certainly appreciate the sound of your laughter. Your laughter can be contagious to your baby (starting at about 4 months), and there is no better sound in the world than your baby laughing hard at your laugh or at being tickled.
Yes. One of the social milestones that we like to see by 4 mos of age is laughter and squealing with pleasure in response to a parent or sibling's tickling or smiling. Initially the baby is imitating , but seems to learn when laughter is appropriate. Babies learn simple games such as peek a boo and pat-a cake somewhere between 6-9 mos.