I had a flatmate who loved over exagerating everything and lying. At first it didn't bother me, but it got to me after a while.
We'd be conversing and she'd either completely exagerate on an incident that had occured earlier, which I happened to witness ,to some friends of hers, or pretend to be clueless about something/knowing someone when minutes ago she was yapping away about how wonderful something/that person is etc.
It's cruel, but it came to the point where I wanted to kill her in her sleep cos the girl was too damn annoying!