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Dissonance occurs anytime you hold two beliefs that are psychologically inconsistent. Often one belief is about some behavior (such as "I smoke") and the other is about the consequences of that behavior (such as "smoking causes cancer"). Note that these two beliefs are not logically inconsistent - just psychologically inconsistent. Holding psychologically inconsitent beliefs like these is unpleasant, so people try to reduce the dissonance. Dissonance can be reduced by altering one of the beliefs (such as denying that smoking really causes cancer) or by adding new beliefs that minimize the psychological inconsistency (such as "we all die anyway-- better to enjoy life and die young than to live a long and miserable life").
According to Elliot Aronson (in The Social Animal) dissonance effects are strongest when they violate people's self-concepts. I hope this helps.
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