Step 1: Recall the property of the stream function.
For a two-dimensional incompressible flow,
\[
\nabla^2\psi=0
\]
is Laplace's equation.
This condition is satisfied when the flow is
\[
\boxed{\text{Irrotational}.}
\]
Step 2: Identify the correct flow type.
If
\[
\nabla^2\psi=0,
\]
then the vorticity is zero.
Hence,
\[
\boxed{\text{The flow is irrotational}.}
\]
Therefore,
\[
\boxed{(B)}
\]
is the correct answer.