Don't worry, most English speakers (especially Americans) have difficulties with this one too because of the similarities of these two verbs. The difficulty is that "to lie" has several meanings which have different conjugations; when it means 'to be in a horizontal position' or 'to be situated', it is conjugated thus: "I lie down on the bed." (Present) "I lay down on the bed." (Past) "The village lies in the valley." "The post office lay just next to the supermarket before it was tragically destroyed in a freak yachting accident." BUT when it means 'to tell a falsehood" its past tense is 'lied'; He lies all the time. He lied about his criminal record. Can you see where the confusion comes from? The past tense of 'lie' in the first instance being 'lay', people often use them interchangeably. But they're different verbs: lie - to be horizontal/to be situated OR to tell a falsehood lay - to place down, to leave something somewhere OR what a chicken does when it produces an egg. (past participle: laid) Lots of people will say "I laid down" to mean that they went to sleep when in fact they should say "I lay down". However, to many English speakers that seems incorrect because it sounds identical to the present tense of 'to lay'. You will get away with using them interchangeably in speech but in written speech you must distinguish: I lay down to sleep at 10pm. I laid the man down onto the bed.

Lie: noun 1. a false statement made with deliberate intent to deceive; an intentional untruth; a falsehood. 2. something intended or serving to convey a false impression; imposture: His flashy car was a lie that deceived no one. 3. an inaccurate or false statement. Lay: verb (used with object) 1. to put or place in a horizontal position or position of rest; set down: to lay a book on a desk. 2. to knock or beat down, as from an erect position; strike or throw to the ground: One punch laid him low. 3. to put or place in a particular position: The dog laid its ears back.

"Lie" is an action usually performed by a person. It refers to orientation (parallel to the ground). "Lay" is an action performed by a thing (to place something atop another regardless of orientation). You can lie down, or you can lie suspended in air. Both can occur because you are oriented parallel to the ground. You can lie a book down so the cover touches the ground, or you can lay a book on a shelf on its spine or on its cover. So long as the book is on top of something else, you are "laying" it.