lie and lay seem to give people more difficulty than do all the other irregular verbs

combined. Here's why: The past tense form of lie is lay, so it's indistinguishable
from lay in the present tense except in usage. (Sit and set, probably the irregular verbs
that give people the most trouble next to lie and lay, for example, have no parts in
common. It's sit, sat and sat but set, set, set.)

The principal parts (most-common verb forms) of lie are:

lie (present,) lay (past) and lain (past participle).

The principal parts of lay are:

lay (present), laid (past) and laid (past participle).

As an aid in choosing the correct verb forms, remember that lie means to recline,
whereas lay means to place something, to put something on something.

Lie means that the actor (subject) is doing something to himself or herself. It's
what grammarians call a complete verb. When accompanied by subjects, complete
verbs tell the whole story.
Lay, on the other hand, means that the subject is acting on something or someone
else; therefore, it requires a complement to make sense. Thus lay always takes a direct
object. Lie never does.

More on lie: In its simplest (command) form, when the you is implied, lie is a
sentence all by itself. If you tell your dog, Lie, as in (You) lie (down), that's a
complete sentence. (The same is true, by the way, of sit.) In written material, we
generally use down with lie when we mean to recline not because down is needed
grammatically but because we wish to distinguish from the regular verb lie, meaning to
tell an untruth (as in lie, lied, lied).

Tip: Always remember that lay is a transitive verb and requires a direct object.
(A transitive verb acts as a conveyor belt, transmitting action or influence from the
subject to the object.) The common saying, Let's lay out in the sun, is not only
incorrect grammatically, it suggests a public promiscuity that's frowned on even in this
age of sexual permissiveness because you're implying the existence of a direct object
of lay: Let's lay (her/him?) out in the sun. Not that there's anything wrong with THAT!
It's just ungrammatical unless you're talking about sex.

Correct Usage:
Lie
Present tense: I lie down on my bed to rest my weary bones.
Past tense: Yesterday, I lay there thinking about what I had to do during the day.
Past participle: But I remembered that I had lain there all morning one day last week.

Lay
Present tense: As I walk past, I lay the tools on the workbench.
Past tense: As I walked past, I laid the tools on the workbench. And: I laid an egg in
class when I tried to tell that joke.
Past participle: . . . I had laid the tools on the workbench.