The verb "to lay" means to place something in a particular position. This most often means setting it down, perhaps on the ground or on a table. This verb is transitive, which means that it takes a direct object. In simple terms, "to lay" is an action you perform on something else.
On the other hand, the verb "to lie" means to take on a recumbent position, typically stretched out on your back or side. This verb is intransitive, meaning that it does not take a direct object. It's usually an action people or animals perform on themselves.
Now the main difference is on the past and present tense and this is where a lot of people get it wrong.