My 13 year old sister is a compulsive liar. You cannot get a true answer when asking her a question. If you ask her if she did something, she will deny it like there's no tomorrow even if you have proved it over and over again.
She also comes up with these false (and incredibly detailed) scenarios that she tells her friends. The most amusing one I've heard was that she was addicted to speed and my parents made her go to rehab in another state. When it came time to board the plane, my mom started crying and changed her mind at the very last second. Currently she's describing a party she's at right now and how drunk she is in bulletins on myspace (on the sidekick that she doesn't have), but she's sitting in her room drinking apple juice... doesn't seem like a very fun party to me.
What causes someone to lie like this? Trying to fit in? She wants attention? Deeper issues?