The current scholarly consensus on Lao Tzu, sadly, is that he probably did not, as such, exist. Analysis of the Tao Te Ching seems to imply that it was a concatenation of bits of many different works and Taoist parables rather than the unitary work of a single person. Chinese legend is chock-full of interesting stories about Lao Tzu, but most of them seem fairly apocryphal.
He was supposed to have baffled Confucius in a debate - and while the idea of Confucius and Lao Tzu debating philosophy is a compelling image, and a convenient metaphor for the competing roles the two ideas were to have for the next few hundred years of Chinese history, the Tao Te Ching was compiled a good century or two after Confucius was dead. Too bad.
Lao Tzu was supposed to have been, like Confucius, a wandering bureaucrat-for-hire who toiled away for many years as a functionary for one of the competing kingdoms during the Spring and Autumn Period of the Eastern Zhou Dynasty, gaining a reputation for his wisdom. Towards the end of his career (which some accounts give as being well into the second century of his life), he grew disgusted with the futility of nobody listening to him, and rode off to the western desert on a giant blue ox (no foolin'!) to go into philosophical retreat. When he got to the last border checkpoint, a customs official recognized him and begged him to give an accounting of his wisdom before he left the Middle Kingdom forever, and thus the Tao Te Ching came to be.
Those looking for a dead Taoist sage to subject to rockstar-like adulation should probably look to the life and works of Chuang Tzu instead, who in addition to being a pretty cool guy in his own right, has the (perhaps) inarguable virtue of almost certainly having actually existed.