Pathological liar is a common, pop psychology insult, most often thrown at personal rivals or public figures whom one wants to portray as more than just a liar, but thoroughly and fundamentally dishonest. Pathological lying also seems to be a real psychological condition, though one that has been subject to surprisingly little study given how common many of us would empirically judge it to be.
There's no one generally accepted definition of a pathological liar, but the most common one would be somebody who not only lies constantly, but does so regardless of the consequences; many of their lies are pointless, unbelievable, and easily falsifiable, and in fact often bound to be exposed. Many observers would also add that the liars seem to believe their lies wholeheartedly, even the most bizarre and obviously false. Many people, perhaps even most, can say that they've dealt with somebody matching this description at some point in their life.
A good example: I once knew this guy who, among many, many other improbable things, absolutely insisted that he was starting a career as a male model. He would tell us about meetings with his agent, shoots he'd been to, and eventually, proudly announced that he'd be appearing in the next issue of GQ. None of it was true, and naturally, the next issue of GQ came out without him in it, and everybody he'd told the story to knew it.
Despite the apparently common nature of pathological lying, mainstream psychology seems to make relatively little note of it. The DSM-IV makes no mention of pathological lying as a discrete condition, but rather considers it mostly as a symptom of the personality disorders, most notably Antisocial Personality Disorder (the condition of "sociopaths") and Narcissistic Personality Disorder. Interestingly, it also seems that certain kinds of brain damage, most commonly to the thalamus, can also occasionally turn people into pathological liars. | 
