But I'm not lyin' when I'm laying on the beat
Once again, that lion/lyin' homophone technique is going on here. “Layin' on the beat” is a reference to his smooth rap skills: he ain’t gon' bullshit! “On the beat” also is used to refer to a cop who mainly just circles the block, again referencing the block from one of the previous lines.
Note that Lupe makes this line grammatically correct: He is neither lying (deceiving) nor lying (down) when he is laying down rhymes on the beat.
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