Lay is a transitive verb (used with an object) meaning to set in a horizontal position.
I lay tiles down.
He laid his book on his lap.
He had laid the bouquet on the table.
She was laying out the napkins.
Lie is an intransitive verb (used without an object) meaning to recline or rest in a horizontal position.
I lie down on the sofa.
She lay down that afternoon.
She had lain down earlier when her migraine was bad.
She was lying down while he inspected her wound.
Still confused which to use? Ask yourself this: Is it a person or living entity who is reclining on a bed, the floor, generally getting comfy? Use lie.
Is it someone putting a thing down? Use lay.
More helpful info is here: http://web.ku.edu/~edit/lie.html