The American Heritage® Book of English Usage:
A Practical and Authoritative Guide to Contemporary English
by Editors of the American Heritage® Dictionaries
Traditional rules of grammar
Commonly confused words
New uses of words
Problems of word order and agreement
Words with multiple or unusual pronunciations
Concerns about "political correctness"
lay / lie
People have confused lay ("to put, place; prepare") and lie ("to recline; be situated") for centuries. They will probably continue to do so. Lay has been used to mean "lie" since the 1300s. Why? First, there are two lays. One is the base form of the verb lay, and the other is the past tense of lie. Second, lay was once used with a reflexive pronoun to mean "lie" and survives in the familiar line from the child's prayer Now I lay me down to sleep. It is not a long leap from lay me down to lay down. Third, lay down, as in She lay down on the sofa, sounds the same as laid down, as in She laid down the law to the kids.
Here's how to keep them straight. Lay is a transitive verb it takes an object. Lay and its principal parts (laid, laid, laying) are correctly used in the following examples: She lays down her pen and stands up. He laid (not lay) the newspaper on the table. The table was laid for four. Lie is an intransitive verb and cannot take an object. Lie and its principal parts (lay, lain, lying) are correctly used in the following examples: She often lies (not lays) down after lunch. When I lay (not laid) down, I fell asleep. The rubbish had lain (not laid) there a week. I was lying (not laying) in bed when he called.
There are a few exceptions to these rules. The phrasal verb lay for and the nautical use of lay, as in lay at anchor, though intransitive, are standard. It's probably a good idea to keep the two verbs distinct in formal writing, since people will be looking for evidence of your education in your work. If you're submitting something for publication, the copy editor will almost certainly fix your lays and lies for you. But bear in mind that lay is often an expressive way to say "lie" and has a charmed existence in certain uses. Don't most dog owners at one time or another say Lay down! to their dogs? How many golfers play it as it lays? How many employers exhort their workers with Let's not lay down on the job? What if Bob Dylan, in a fit of zeal for correctness, had written "Lie, Lady, Lie/Lie across my big brass bed"? Somehow it's hard to imagine the lady sticking around.