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Lying or Laying?

This has always been a bit confusing for me.  Yes, even English majors get confused about words.

I know “lying” is the gerund form of “to lie,” and that’s a no brainer.  Lying simply means not telling the truth.

What I’m talking about is something like “So and so is laying down”.  Do we write “laying” or “lying”?  I know I used “laying” in the example, but I’m still not sure. 

And how is it pronounced?  Like “lie” or “lay”?

Oh, and one more thing is it, “She layed down” or “she lied down”?

If anybody can make sense of this post and help me understand how and when to use these conjugations, it would be much appreciated.