Pseudologia fantastica, AKA pathological lying, morbid lying and mythomania, is an informal psychiatric disorder. It has been recognized as pathological behavior since it was first described in the medical literature by Anton Delbrueck in 1891, however it is not currently recognized as a psychiatric disorder by the Diagnostic and Statistical Manual (DSM), the official reference for mental health professionals. It is used as a diagnostic criteria for other conditions, including Antisocial Personality Disorder, Narcissistic Personality Disorder, and Munchausen's syndrome (and other factitious disorders).
While different sources give different criteria for pathological lying, the characteristics are generally:
1. The falsehoods are not a manifestation of delusion or some broader type of psychosis. They are generally believable and the subject recognizes that the lies are untrue, although is generally unwilling to admit this.
2. It is a chronic condition, not specifically provoked by an immediate situation. It is a fixed personality trait.
3. It arises from an internal, not external, motive. Long-term abuse might cause a person to lie repeatedly, without the lying being a pathological symptom.
4. The stories told are not geared solely towards benefiting the subject; that is they lie even when there is no obvious or sufficient benefit to doing so. However, the stories generally have a self-aggrandizing or self-centered focus.
There is currently some debate whether pseudologia fantastica should be recognized as a stand-alone disorder. There is no doubt that it can cause great harm in social relationships, in business, and with the law; however it usually appears in the context of other psychological and neurological disorders (about 40% of pseudologes have evidence of central nervous system dysfunction). However, it is certainly possible for otherwise healthy pathological liars to receive treatment; there may be difficulty in billing to to your healthcare provider, but your therapist may be able to work around this.
References:
Wikipedia: Pseudologia fantastica
Wisegeek: What is pseudologia fantastica
King BH, Ford CV (January 1988). "Pseudologia fantastica". Acta Psychiatrica Scandinavica 77 (1): 1–6.