Is lying good in a relationship?

No it never does!

Even when you try to hide something from someone because you think it might hurt him/her if he/she found out about it, the truth will eventually get out and when he/she finds out that you were keeping secrets from him/her, it might ruin relationships and rapports.

In a less dramatic scenario, if your friend is about to go to the Prom and asks you if the dress she is wearing looks good, and it really doesn't, you shouldn't lie either. If you say it looks good, she might be more confident of herself and flaunt herself and in turn resulting in embarrassment. Others might also think the same way as you and find her dress not exactly appealing and this may upset her even more when she finds out. What she wants is probably an honest opinion, if not why else should she ask?

However that does not mean that you shoot and tell her the dress is ugly. Do remember to be tactful and respect others' choices. You could perhaps tell her in a casual manner that it looks slightly strange, and ask her why she had chosen the dress. Only when you fully understand her motive from her perspective should you make a decision on whether it is reasonable to tell her to alter her fashion/dressing sense. Otherwise, you should just leave it as it is.

Hope that helps!