The film features a narrative set in an alternative reality in which there is no such thing as lying and everything said is the absolute truth. In this world people make blunt, often unintentionally offensive statements. Physicians are brutally honest with patients. They show no warmth and offer no hope. Not being able to lie has resulted in an absence of religion in this alternative reality. Because there is no fiction, the movie industry is limited to dry, lecture-style historical readings and product advertisements are bluntly truthful.
Mark Bellison (Ricky Gervais) is an average Joe lecture-film writer who is assigned to write about the 14th century, a "very boring" era. One night he goes out on a date with the beautiful, kind-hearted and wealthy Anna McDoogles (Jennifer Garner). She tells Mark she is not attracted to him, because of his looks and failing financial situation, but is going out with him to satisfy her extremely prejudiced mother and as a favour to Mark's best friend Greg Kleinschmidt (Louis C.K.).
The next day Mark is fired from his job because of the lack of interest in his films, and his landlord threatens to evict him for not paying his rent. Depressed, he goes to the bank to close his account. The teller informs him that the computers are down, and asks him how much money he has in his account. Mark is about to tell her when a strange reaction occurs in his brain, as he remembers how much money his landlord said he owed ($800). He has an epiphany that enables him to tell the world's first lie, to the effect that he has $800 in his account. The computer comes back online and shows his balance is $300. The teller gives him the full $800 noting that the computer has made a mistake.
Mark then lies in a variety of other circumstances, including, preventing a police officer (Edward Norton) from arresting his friend Greg for drunk driving, getting money from a casino, and stopping his neighbour Frank Fawcett (Jonah Hill) from committing suicide. He realises that lying can be used for better purposes than just for personal gain by doing this. He then writes a screenplay about the world being invaded by aliens in the 14th century, in which it is claimed that the memories of all humans were erased. He becomes wealthy from the success of the film which he names The Black Plague.
Mark convinces Anna to go out with him again, hoping she will see past his looks now that he is financially secure. On their date Anna congratulates Mark for his success and admits that he would be a good husband and father. She is still not attracted to him, saying that, if they ever have children, Mark would contribute half of the heredity to their children, resulting in "fat kids with snub noses". Mark then gets a call that his mother has had a heart attack and rushes to the hospital. There, the doctor (Jason Bateman) tells him that his mother is going to die. She is scared of death, believing that it will bring an eternity of nothingness. Mark, through tears, tells her that death instead brings a joyful afterlife, introducing the concept of a Heaven to her, and she dies happy while the doctors and nurses appear astonished by what he has said.
Mark soon receives worldwide attention for his supposed new information about death. Under pressure from Anna, he tells them, through "ten rules", that he talks to a "Man In The Sky" who controls everything and promises great rewards in the good place after you die, as long as you do no more than three "bad things". Some time later Anna and Mark are together in a park and Anna asks him, if they marry, would his now being rich and famous make their children more physically attractive. Mark wants to lie but does not because of his strong feelings for Anna.
Meanwhile, Mark's enemy Brad Kessler (Rob Lowe) pursues Anna romantically, motivated by Mark's success. However, Brad's arrogant, spiteful manner makes Anna uncomfortable, though she continues dating him; they become engaged. Anna invites Mark to the wedding. Mark tries to discourage her from marrying Brad, but fails. Anna goes to the park she first went to with Mark and sees a slightly overweight child with an ice cream being bullied by thinner children. She shouts at them and they run away. She approaches the boy and wipes away his tears while asking his name. He replies 'Short Fat Brian' to which she tells him: 'You are so much more than just that.'
Before the wedding Mark's friend Greg shows up and tries to convince him that he has not missed his chance with Anna. Mark reluctantly attends Anna and Brad's wedding, where he objects to the marriage, but the officiant informs him that only the Man in the Sky can stop the wedding. Brad and Anna both ask Mark to ask the Man in the Sky what Anna should do but Mark refuses to say anything and leaves, wanting Anna to choose for herself. Anna walks out and Mark confesses his ability to lie and tells her that the Man In The Sky was made up. Anna struggles to comprehend the concept and asks why he did not lie to convince her to marry him; Mark states that it "wouldn't count". Anna confesses that she loves him.
Some time later, the now-pregnant Anna and Mark are shown happily married with a son, who appears (by his actions) to have inherited his father's ability to lie.

Question: Why does Mark tell his Mother the fantastical story about Heaven after death?
Answer: So she will not be afraid and can die happy.
Alternative answer: His mother was about to die from a heart attack and was afraid of dying, so this comforted her.