The act of reading a book, or watching a movie, or playing a game, is a bond of trust between the audience and the creator. The audience is trusting that the creator isn't going to waste their time and will provide a satisfactory experience. For the audience's part, the first step in that relationship is participating in said media (reading the book, watching the movie, etc.) The second step is buying into it, in other words, Willing Suspension of Disbelief, but it's not only that. You see, when it comes to stories, the audience is intended to believe everything a character says is the truth, unless given a reason to believe otherwise.
How exhausting would it be to watch a relatively straight forward Romantic Comedy and have to wonder if when every time a character said they were doing something without a scene to prove it, they weren't cutting up grandmas, robbing banks or killing vampires? Second guessing everything a character says when it's not necessary only takes away from the enjoyment of the work. It either turns your mind into a snarl, or your brain comes up with a scenario that is so much cooler than what actually happens that you are disappointed.
But even more than characters, a reader is expected to trust the narrative, especially if it's in the Third Person Point of View. How can a reader know or even guess what's going on if they can't trust what the narrator is telling them? If the narrator is lying, the story could change at any moment, anything could happen. That thing we were told isn't possible? It could happen. That guy we are told is dead? He could come back. Everything we were led to believe is important could be shoved aside and a whole new plot could start up. Seriously, if you can't trust anything the narrator says, then why bother reading or watching the story in the first place?
So why does this matter? Well it matters because if you know that the reader is going to automatically believe what your story says, then you can play with that. Many story elements meant to surprise the audience would lose impact if said audience weren't more or less blind to the fact they were about to be duped. Some examples include:
When Plot Lies
- Plot Twist: When, after having led you into believing one thing about what is happening, something happens which radically changes this perception. When this doesn't happen until the end, it's a Twist Ending.
- Prophecy Twist: When the story leads you into believing a prophecy means one thing, only for you to find out it meant something else, or the prophecy wasn't as set in stone as it was said to be.
- No Man of Woman Born: When the "real meaning" of a prophecy relies on an extremely dubious interpretation, beyond what a reasonable person would consider valid.
When Narrative Lies
- Rashomon Style: When a story is made up of multiple narrations by different viewpoints of the same event, none of which add up or agree with one another. Of course, this time the reader expects falsehood.
- Unreliable Narrator: When a narrator has the same kinds of biases and uncertainties as a normal person would, and therefore their account isn't always trustworthy to the reader.
When Characters Lie
- I Lied: When, well, a character lies. But especially when the audience wasn't given clues that he was lying and we thought we were allowed to believe him.
- The Cake Is a Lie: When a character is promised something by another character upon completion of a task, but it turns out they lied.
- From a Certain Point of View: When something stated has a justification that rests on a very, very shaky technicality which most people would not consider valid and otherwise seems like Blatant Lies.
- Unreliable Expositor: The words are put in the mouths of people who have a very vague idea of what's going on and/or reasons to misguide even if they do. Characters don't even have to intentionally make up anything. Like most people, they tend to justify their actions. Not being omniscient, they may close gaps by jumping to conclusions.
This is an Omnipresent Trope. Villains Never Lie would be a subtrope and is both when other characters trust obviously untrustworthy characters, as well as the tendency for villains to lie less often then we would expect of them.