I'll stand up for the English...
Yes we do say 'taking the mickey', or 'taking the mick', and it does mean 'making fun of', in a rather more polite way that some others I can think of!
I don't know where it comes from, but I only found out yesterday that a similar phrase 'taking the p*ss', (don't know if other countries use that one?), which is a cruder way of saying the same thing, has an interesting history...
Go back to the time of Henry VIII.
In the textile industry a substance called 'Alum' (sp?) was used as a dye fixative (hang in there, it gets better...).
This substance was all imported from Italy. However, Henry VIII fell out with the Pope (ok, simplified a bit there!), and therefore had no access to the stuff we needed.
They found that a chemical process with urine and a type of shale from one particular coastal region (Whitby, North Yorkshire, where Dracula was supposed to have visited), produced the 'alum' (or whatever) and the problem was solved.
They collected urine from throughout the land, barrelled it up, and shipped it round the coast to Whitby.
However, at polite dinner parties the mariners didn't like to admit that all they did was ship urine, so they said that they shipped 'wine'. This euphemism became so common that the standard reply became "come on, you're really taking the p*ss, aren't you?"
What really freaked me out was that they still apparently collected urine in some areas until as late as the 1950's!!!
I wonder if you got paid for it...?