Meaning of 'If you're happy and you know it, clap your hands'

[Daemon99]

There is a song whose lyrics go something like: If you're happy and you know it, clap your hands.

Does 'it' here refer to the fact that you are happy? How could somebody be happy and not know it?
_________________
Non-native speaker of English
=================================
I intend to live forever - so far, so good.

[Kitosdad]

Does 'it' here refer to the fact that you are happy? Yes it does.

Your other supposition is also correct.

One could be sad, and also feel IT. LOL.
_________________
If you need me, I'm here.

[Gray]

As it is a lyrics, we should not take it as it is. It might be the case that the poet meant to say -- we all are happy but we deny that. And therefore he/she urges us to look inside to find/know the happiness.

See if you could connect to the meaning
_________________
First lesson - English, not english. I, not i. ~A student of English

[Kitosdad]

Wow, you are going " deep " now Gray. But a thoughtful post.
_________________
If you need me, I'm here.