Lay is transitive, meaning it requires an object. Its meaning is similar to "put."
Anna lays Steve's clothes on the bed every Monday morning.
Lie is intransitive, meaning it requires no object. Its meaning is similar to "recline."
Anna lies in the hammock when the weather is nice.
Tense concerns regarding lay:
The past tense of lay is laid:
Last night I laid the plates on the dinner table.
The past participle of lay is also laid and is used to create the past perfect and present perfect (non-continuous) verb forms:
Once Anna had laid the plates on the dinner table, Steve walked in.
Have you laid the photos on my desk yet?
Tense concerns regarding lie:
The past tense of lie is lay:
Last night I lay in the hammock and gazed at the stars.
The past participle of lie is lain and is used to create the past perfect and present perfect (non-continuous) verb forms:
Once Anna had lain on the sofa for a few hours, she decided to get up and go for a walk.
Have you ever lain in a hammock?
Just remember each verb's three forms in the order of base verb, past tense, past participle:
Lay: lay, laid, laid
Lie: lie, lay, lain