What makes people a habitual liar?
It is a hyper-sensitive insecurity and overcompensating by always making themselves appear as slightly better or smarter, or kinder, righter, and ironically, more honest than they see themselves to be. Habitual liars can't seem to get that we can accept and love them as they are, flaws and all … so they deny and hide theirs, which they perceive as reasons to be rejected. I think we all do it to some degree.
Not all liars are liars, many people have a detachment from reality and live in state where reality and fantasy constantly cross over and don't have a great grasp on either. Most of us sometimes inhabit that world too, when we exaggerate or improve on a tale because it suits our internal mental landscape better.
Narcissist? Maybe? I knew someone like that. He always lied about who he was and who the people he associated with were. He always wanted to appear more than he was in reality. No. Narcissist don't care what others think of them. Habitual lairs, lied because they cares.
Sometimes, it's just entertainment. Most habitual liars who lie about things that are completely pointless to lie about, are extremely intelligent, and are simply bored with life the way it is. Social engineering, seeing what our boundaries are, what you can get away with, seeing how long a lie can permeate, there's a lot to it.