munchausenism

from The Century Dictionary.

• noun A disposition to indulge in extravagant romance and wild exaggeration, in the manner of Baron Munchausen, the hero of a work of fiction originally composed by Rudolph Erich Raspe (1737–94), a German scholar and adventurer, whose work, written in English, and published in England in 1785, was afterward expanded by booksellers' hacks, and became very popular.
• noun A grossly exaggerated story or statement such as those of Baron Munchausen; an incredible tale; a ‘whopping’ lie.

from the GNU version of the Collaborative International Dictionary of English.

• noun An extravagant fiction embodying an account of some marvelous exploit or adventure.