Lay and Lie

To lay is to put something down.  Lay down your pen.  The verb must act on another object.

To lie is to recline.  Lie down on the couch.  I will lie in bed until noon.  

The past tense of "lay" is "laid."  After the test I laid down my pen.

Unfortunately, the past tense of "lie" is "lay," which can cause confusion.  Yesterday I lay on the couch all afternoon.