Laid is the past tense of lay, which means to put something down and always takes an object — "she laid the folder on the desk". Lay does double duty: it is the present tense of that verb ("lay the folder there") and also the past tense of lie, meaning to recline — "I lay down for an hour". If nothing is being placed, you want lie/lay/lain, not laid.
Two verbs sharing a form
The trouble comes from one overlap. Set the two verbs out and it becomes manageable:
- lay (to place something): lay — laid — laid — laying. Needs an object.
- lie (to recline or be situated): lie — lay — lain — lying. Takes no object.
So lay is the present of one verb and the past of the other. Laid belongs only to the first.
How each looks in a sentence
- "Please lay the tiles in a straight line." (present, object = tiles)
- "He laid the baby in the cot." (past, object = baby)
- "The hens have laid four eggs." (past participle)
- "I lay awake until three." (past of lie, no object)
- "The village lies in a valley." / "It has lain empty for years."
The test
Ask: is something being put down? If you can name what — the book, the cable, a wreath, an egg — use lay/laid. If nobody is placing anything and the subject is simply resting or positioned, use lie/lay/lain.
A quicker substitution: try place. "He placed the baby in the cot" works, so laid is right. "I placed awake until three" does not, so it must be lay.
How much does anyone observe this?
Honestly: in speech, not much. "I'm going to lay down for a bit" and "he was laying on the sofa" are extremely common across all varieties of English, and the substitution is long-established rather than new. Edited prose, exams and style guides still treat it as an error, and copy editors will change it. So the distinction is worth keeping in writing while recognising that plenty of fluent speakers do not make it aloud.
Two things to avoid
There is no such word as layed; the past tense is always laid. And lain is the participle of lie — "the letter had lain there for weeks" — not laid, which would imply someone placed it. Note also that lie meaning to tell an untruth is a third verb altogether: lie — lied — lied.