The verb “to lie” can mean two things:

1. to deliberately tell untruths – e.g. Don’t lie to me!
2. to be in a horizontal recumbent position – e.g. Lie down and relax.

Confusion arises – also among many native speakers of English – about the second and third forms of these verbs as well as the -ing form, which is often confused with the verb “to lay”.

Here are some examples based on the things a woman might say to an unfaithful husband.

to deliberately tell untruths

1^st form – You lie!
2^nd form – You lied to me.
3^rd form – You have lied to me and I can no longer trust you.
-ing form – You were lying to me then and you are lying to me now!

to be in a horizontal recumbent position

1^st form – How can you lie there peacefully as if nothing has happened?
2^nd form – I lay awake all last night unable to sleep.
3^rd form – You have lain with another woman!
-ing form – How can you carry on lying there? Say something!

Note that the 2^nd and 3^rd forms of the verb are the forms that differ.

As the 2^nd form of this meaning of “lie” is “lay”, it is sometimes confused with the verb “to lay”, which has a different but related meaning.

“to lay” means to put something down in a horizontal position.

Here’s the next instalment of the dramatic story of marital infidelity.

1^st form – I raised the gun and shouted, “Lay down the knife!”
2^nd form – He laid the knife on the table and put up his hands.
-ing form – As he was laying down the knife, I noticed there were tears in his eyes.
3^rd form – Having laid aside our differences, we made a deal. I would get the house and the car. He would keep his record collection.

It is a common mistake to confuse “lying” and “laying”:

WRONG
I was laying in bed all night unable to sleep.
The knife was laying on the table. 

RIGHT
I was lying in bed all night unable to sleep.
The knife was lying on the table.