A fellow blogger, here, wrote a piece over my post and nytimes news about Iranian swimmer who called in sick in Beijing Olympic because another competitor was an Israeli . At the end he asked "Doesn’t their common god forbid lying?"
Very nice question, so let me explain it. Although Islam forbids lying but under some situations it encourages Muslims to lie. There is a concept in Islam called al-Taqiyya which literally means: "Concealing or disguising one's beliefs, convictions, ideas, feelings, opinions, and/or strategies at a time of eminent danger, whether now or later in time, to save oneself from physical and/or mental injury." A one-word translation would be "Dissimulation."1
The best term to explain al-Taqiyya is diplomacy and as Isaac Goldberg said "Diplomacy is to do and say the nastiest things in the nicest way."
Two major branches of Islam Sunnis and Shiites have different view on al-Taqiyya. Shiites practice al-Taqiyya but Sunnies reject the idea of al-Taqiyya and consider it hypocrisy but they practice it whenever there is a need to justify their actions. You can easily find the more recent example of using al-Taqiyya practice by Sunnis in 9/11 terrorist attack. In 9/11 all participant terrorists were Sunnis and they have provided all necessary lies to do what they meant to do. Even if you look at the videos of Wahhabi hatred teachings in UK schools, and their Imams denial after they got caught.
I found Sunnis practice al-Taqiyya but publicly reject it but Shiites just practice it. In my point of view, Shiites are hypocrites and Sunnis are double-hypocrites in this matter. I know Daniel Pipes has different opinion on Shiites and Sunnis point of view to al-Taqiyya but I respectably disagree because I see how they practice in reality rather than just listening to them.
So it's good to know that Allah encourage Muslims to lie if they are vis-a-vis of unbelievers in Allah.