Implies that a promised reward for one's work is false, with the one proffering the reward never intending to give it in the first place, possibly because the reward never even existed (see also: "there is no spoon"). This phrase can be used to express grief or frustration regarding any situation where there is an imbalance between effort and reward. This phrase was popularized by the game "Portal" by Valve Software Corporation.
During the game, GlaDOS, an artificially intelligent operating system and the game's passive-aggressive guide, uses the reward of cake as a motivating factor in an attempt to manipulate the player. It is first mentioned during the "impossible puzzle room", where she urges the player to "quit now and cake will be served immediately". In a later stage, the player can access a "hidden" area of the testing chamber to find a previous test participant had scrawled "The cake is a lie!" among other warning messages. Cake continues to remain the promised reward for completing the test and/or obeying GlaDOS, particularly in the final stages of the game. Finally, in the ending song, GlaDOS cheerfully sings about how "there's no sense crying over every mistake, you just keep on trying 'till you run out of cake."
Comment: I heard this phrase for the first time today. Made me think about "the world" and the lie that if offers satisfaction and meaning in life.
Do not love the world or the things in the world. If anyone loves the world, the love of the Father is not in him. 16 For all that is in the world—the lust of the flesh, the lust of the eyes, and the pride of life—is not of the Father but is of the world. (1 John 2:15-16)