Learn English – “rain was coming till tomorrow”

These examples are a minefield, because lay and lie have the most confusing similar meanings and even overlapping past tense forms. Many people do not use them in the standard ("correct") way, and don't even know the right way. You don't always use the same verb between lay and lie in your examples, and you don't always use the right one in the right place, so I will try to explain those as well.

Technically speaking, the correct way to form the first sentence is:

When she walked in, he was lying on the bed.

The grammarian standard rule is that lie is used when the actor or subject of the sentence is the one who is lying down (which is what is happening in your sentence).

Now, with this correction in mind, on to the answer: technically all of your sentences are correct, but they all mean a different thing.

You use the past progressive when you want to describe an event in the past that took place during another event in the past. So, in your first sentence, "she walked in" is one event that happened, and "he was lying on the bed" means that the walking-in happened during the lying.

In your second sentence, you are have two simple past tense verbs. This time, "was laid" is a passive construction in the past tense (past tense of "lay", specifically). Since the sentence is passive, it means that someone laid "him" on the bed — he didn't do it himself — so the past tense of lay (rather than the past tense of lie) is the correct verb to use. So, this sentence means that at the moment she walked in, someone or something laid him on the bed.

In your third sentence, you again have two past tense verbs. The verb lay is the simple past form of lie, so you are saying that the walking-in and the lying happened at the same moment in the past.

For example, someone on the phone said, "I was calling to ask for a form," when she meant to say, "I am calling to ask for a form."

There's nothing wrong with that past-tense usage. It is standard usage, and has been for a long time. If anything, it is the expected usage and is considered to be the more polite version than your preferred version. (Aside: questions similar to yours do come up every now and then on grammar forums.)

Here's some related info from the 2002 reference grammar by Huddleston and Pullum et al., The Cambridge Grammar of the English Language (CGEL), page 138:

4.3.2 Past time reference in combination with politeness/diffidence

The preterite [the "preterite" is the same as "past-tense" -- F.E.] is commonly used in preference to the present in examples like the following, where it is considered somewhat more polite:

[39]

• i. I wanted to ask your advice.

• ii. I wondered whether I could see you for a few minutes.

The politeness/diffidence feature is also found with the past progressive: I was hoping to see the Manager. The prototypical case (for either aspect) is that illustrated in [39], a declarative with 1st person subject, but 3rd person subjects can be used when I am talking on someone else's behalf: My daughter was hoping to to speak to the Manager. And the same usage carries over into interrogatives, with a switch to 2nd person subject: Did you want to see me?

The following could help in understanding the apparent time related discrepancy: why the past-tense is being used instead of present-tense. CGEL page 138:

Politeness/diffidence feature as an implicature

This conventional use of the preterite is quite consistent with its basic past time meaning. It would not be correct to say that [39], for example, is an ambiguous sentence, interpretable in one sense as describing my wants at some time in the past and in another as a more polite, more diffident version of I want to ask your advice. Rather, the first of these interpretations corresponds to what the sentence means, and the second is a context-dependent implicature deriving from that basic, literal meaning. In the absence of any contextual indication that I am referring to some definite time in the non-immmediate past, T(r) will here be interpreted as immediate past time. As the situations are states, not occurrences, use of the preterite does not entail that the state no longer obtains. And since there is nothing to suggest that the state has ended, the interpretation will be that the state also obtains at T(d), so that [39] conveys "I want to ask your advice", "I wonder whether I can see you for a few minutes".

The added politeness associated with the preterite comes from avoiding explicit reference to the immediate present: I distance myself slightly and thus avoid the risk of appearing too direct, possibly brusque.