In Owen's "Dulce et Decorum Est," the "old lie" is, as the poem says, "dulce et decorum est, pro patria mori." This is a Latin phrase which means "it is sweet and good to die for your country." In Britain, it is very commonly seen on war memorials and at the time of the First World War, would have been seen already in most villages and towns inscribed beneath the names of those who had fallen in the Boer War only a few years earlier. The phrase comes originally from the poet Horace.
Owen's complaint in this poem is that the "old lie" was one told repeatedly in order to induce young men into dying for their country, usually dying horrible deaths. The telling of the "old lie" is an act of hypocrisy, and one which represented the refusal of those at home to accept the realities of the First World War, which introduced soldiers to atrocities previously unknown. The soldiers who joined the army believing this patriotic lie, that to die for their country would be "sweet," could hardly have expected to find themselves "bent double, like old beggars under sacks"—not exactly an image in keeping with that of the noble soldier. Owen says that if those who, ignorant of reality, told this lie could see the sights that he had seen, they would not tell it with such "zest" to the "children" who would so willingly fall for it in their youthful lust for "glory."