People who believe their own lies are most commonly identified as pathological liars, however, they can also be identified as suffering from narcissistic personality disorder or borderline personality disorder. These people sometimes believe their own lies on a conscious level.
Pathological liars all frequently lie without any reason for doing so. They do not look at lying as a way to obtain goals and external benefits in the way that most people do. Most people will lie in order to get something that they want without believing their own lies. Pathological liars will lie consistently and continually in large fantastical ways that can make it obvious to others that they are lying. Yet the pathological liar will believe his own lies and recreate his own reality.
Those suffering from narcissistic personality disorders and borderline personality disorders will also believe their own lies but on a more unconscious level. They do not want to be honest with themselves so they will change the way that they think to fit with their lies. Narcissists will often tell themselves and others that everyone loves them even though they do not. They want to believe it and so they say it. Borderline personality disorder sufferers find that their emotions are too intense to handle so they claim that their emotions are facts.