Lay is an irregular transitive verb (lay / laid / laid - laying). It needs a direct object. It means to put something or someone down (often in a horizontal postion).
For example: "Lay your head on the pillow."
Lie is an irregular intransitive verb (lie / lay / lain - lying). It does not take a direct object. It means to rest in a horizontal position1 or to be located somewhere2.
For example: "If you are tired lie here and have a
!Lie also means to say something that isn't true but it takes the following form (lie / lied / lied - lying). For example:You should never lie to yourself.
!To lay can also describe a chicken or other animal who produce eggs. For example:Hermine's hen laid two eggs this morning.