Uso is the common everyday word for a 'lie' in Japanese. It is by no means a term of praise, but it is somewhat less pejorative than the word 'lie' in English, which has a considerable amount of moral opprobrium attached to it. Uso! -- 'you must be lying!' -- is used as an exclamation in Japanese in situations where 'You must be kidding!' would be expected in English.
The Chinese character for uso is the rather complex character , which is not in the Joyo Kanji. The official alternative is to use hiragana, namely, as in the following poster from the Japanese Communist Party:
However, rather than using hiragana, it is common to use katakana , which helps set the word off visually from the surrounding text. Some examples:
A Google search in August 2003 reveals that the kanji form is most common, but both katakana and hiragana are also very common. (Occurrences of may be inflated by other words such as kawa-uso, a kind of otter.)