As a story verifier, this is one of the commonest problems I come across and often find myself correcting, rather than sending back. Where most people go wrong is using lay when they mean lie.
Below is a quick guide to how these verbs should be used.
To Lie:
To lie is to recline or relax on a bed or a sofa.
Present tense: I lie down on my bed when I'm feeling sleepy.
Past tense: Yesterday, I lay there thinking about what to cook for tea.
Past participle: I had lain there all afternoon, just waiting for her come home.
Present participle: Lying there, thinking of my girlfriend, my hand crept inside my panties.
So, when you want to get jiggy with someone, you ask them to 'lie on the bed' and not 'lay on the bed.'
To Lay:
To lay is to put something down on a flat surface, like when you lay a table cloth.
Present tense: As I walk past, I lay my dildo on the bed.
Past tense: As I walked past, I laid my dildo on the bed.
Past participle: I had laid my dildo on the bed for the last time that week.
Present participle: Laying the dildo on my bed, I could only dream of my girlfriend's return.
However, note: 'I lay on my bed and drifted off to sleep.' BUT 'I laid my head on the pillow and drifted off to sleep.'
So, to summarise, with the most common misuse of these verbs:
We laid there all night, in each other's arms = WRONG!
We lay there all night, in each other's arms = CORRECT!
Finally, please note: Layed is not an English word.
Danny