I know many of you have been lying awake at night in breathless anticipation of this post, so without further ado, I give you some brief clarification of the lie/lay imbroglio.
Lie means to recline, whereas lay means to put something somewhere. So while you can lie on the bed, you lay a book on the bed. The test is whether there is a direct object, or something to receive the action of "lay."
The word lay can mean both depending on the tense, which is one of the many problems in this perplexing issue.
In present tense, use lie without a direct object, or lay with an object.
I lie on the bed of hot coals.
She is laying the misbehaving child on the cactus.
In the past tense, lay has no object or laid has an object.
Yesterday, I lay on a bed of hot coals.
She laid the misbehaving child on the cactus, yesterday.
In the past participle tense, it is have/has/had lain without an object, or have/has/had laid when there is one.
I have lain in this bed of hot coals for long enough!
She had laid the misbehaving child on the cactus just before the police took her away.
My favorite part of researching this item was when Grammar girl pointed out that Eric Clapton uses lay incorrectly—but really, "Lie down Sally" just doesn't quite sound the same, does it?
What I like to do is think my way out of using either one altogether. "I need some rest." "I gently placed the book on the table." If I am unable to get out of using lie or lay, I just act confident. Then, since no one else knows either, I look like I know what I'm doing.