Fabulation is the relating of false information or telling a story of dubious truth. For example, "The child was fabulating about adventures that he had with his imaginary friend." While not uncommon in young children, in adults it is a symptom of compulsive lying. This is the habit of conveying information that is untrue.
An example would be a coworker who brags about their career in professional sports and all of the influential people they know but has actually has no past sports career or influential friends. Compulsive lying is not well understood and it is frequently unclear as to whether these types of liars are just trying to build up their image or if they actually believe the things they are saying. People who constantly fabulate have difficulty in relationships with others because they appear so untrustworthy.