"lay and lie. 1. Verbs. Except in certain technical terms of seamanship, the
intransitive use of 'lay' (= lie) is 'now only illiterate' (OED). In modern
usage 'lay' is transitive only (= put to rest), and makes 'laid'; 'lie' is
intransitive only (= be at or come to rest), and makes 'lay', 'lain', never
'laid'. But confusion even between the words 'lay' and 'lie' themselves is very
common in talk. Still commoner, sometimes making its way into print, is the use
of 'laid' (which belongs to the verb 'to lay' only) for 'lay' the past tense
and 'lain' the p.p. of 'lie', as in 'We laid out on the grass, and could have
laid there all day'. 2. Nouns. 'Lie' and 'lay' are both used in the senses
configuration of ground, direction or position in which something lies. Neither
has a long established history behind it. The OED has only one quotation
earlier than the 19th c., and that is for 'lie' ('the proper lye of the land',
1692); 'lie' is certainly commoner today, and seems also the more reasonable
form; 'lay' perhaps issued from sailors' and rustic talk, in which the verbs
are not kept distinct."

Fowler's Modern English Usage, 2nd Ed. (revised), London: Oxford University
Press, 1968, p. 327.