Whilst "teasing" is a fair enough translation of the phrase, another one is, "poking fun at."

But it's so much more than that. "Taking the Mick" implies an element of gullibility on behalf of the Takee and intent by the Taker to string along the Takee for as long as possible. It suggests sarcasm. It is not...

"What were you thinking wearing that bad Hawaiian shirt?"

It's more like...

"Love the shirt, mate. Where did you get it? How much was it? Wow, that's cheap. I might have to get one myself. Bet the missus loves it. You should wear it to work one day." Ad nauseum (or ad nauseam if you prefer).