lies

"Lie" in this stanza is used as a verb. It refers to making a false or untrue statement, a fib, dishonesty, or to rest in sometime of reclined position. The speaker uses the word in its two main connotations. He uses it to mean that his mistress is being dishonest and untruthful. It is also used to mean that his mistress lies down with other men, implying infidelity.
 * Lie**

Pinocchio: A popular Disney character who is best known for his nose that grows longer when he is lying or feeling pressured.

A cartoon man lying down to relax.