People live on a spectrum of preference. Some prefer to hear the hard truth, regardless of whether it will hurt their feelings. Some prefer a comforting lie, feeling that harmony is more important than being right.
Both views have their pros and cons, and different situations generally call for a different balance on this particular scale. Still, people tend to have a preference for one or the other.
People often prefer different levels in different circumstances eg when we're more emotional, we tend towards comforting lie, and people will generally react to that - keeping any harsh truths for when a person is more able to bear it. Lying to children is often rationalised in this way - falsely in my opinion.
People at opposite ends of the spectrum often simply can't understand what the other people want. What motivates them to prefer a way of dealing with truth so different from their own?
Harmony people can't understand why a person would tell the truth if it might be more hurtful. They'll say, with perplexity "what they don't know won't hurt them, but the truth will hurt their feelings, so why do it?"
Truth people feel like they have no control if people keep lying to them, they'll ask: "They deserve to know the truth, after all, how could I make a decent decision if I can't trust what people say to me?"
Harmony people believe it doesn't matter as long as everyone gets along. Life is about getting-along, after all. Often-times, telling the truth causes them to lose face, which doesn't help anybody. But are they just trying to avoid fixing a problem that's their responsibility to fix? Are they avoiding a truth within themselves because they're too lazy or ashamed to face it?
Truth people feel robbed of a valuable chance to learn something if not told the truth. They feel that they are doing a service to another person by giving them a chance to see themselves and learn something. But are they just nitpicking, poking at wounds or being too lazy to be tactful?
In a bizarre twist, many people will say they prefer truth, but are actually lying. It's more comforting to believe you are a hard-hitting, strong person - able to handle any truth... it's much harder to face up to the truth that you are in fact not able to face up to the truth.
Personally, I've always preferred the truth. Yes, it can be hurtful. Yes - its embarrassing and sometimes degrading to know the negative effects of you impact on the lives of others, and there are definitely times and places where it's better to bite your tongue; but unless pressed, I'll always opt for the truth.
Both giving and receiving.
This can be hard for harmony-people to understand. Just as it's hard to explain that introversion is not actually unhealthy, just a different way of being.
I'll usually get a response along the lines of: "but life is about enjoying yourself, not being right". Saying that I cannot enjoy myself if I know there's something I'm doing wrong, or even "It's just the way I am" generally doesn't help much. Harmony-people still often shake their heads and seem to think there's something unhealthy about the whole thing.
I've had more success when I explained that for me, improving myself is something I like to do. I work hard at it, and try to strip myself of self-delusions (though I'm under no delusion that I've got rid of them all). I am not on the quest for hedonism, but the quest for self-improvement...
So how does that fit with truth? Well - if I do something wrong, and you tell me it's ok - just to keep the peace... you're depriving me of my right to learn from my mistakes. That makes me feel upset.
I can appreciate that others prefer the opposite. They are trying to enjoy life and get through with a minimum of fuss and anguish. Most people seem to feel that if there's something nasty, it's better to coat it in shiny mother-of-pearl so that it's not all sharp and spiky in your side.
I can't help feeling, though, that it'd be much easier in the long run if they just faced up to it and spat it out to begin with. Then whatever it is would be gone from their lives and they could move on...
It often seems to me that people make their lives much more difficult by not facing up to hard truths, but by trying to ignore them or put them off. To convince themselves of the comforting lie in a misguided effort to "make it all go away". We all recognise these in other people... "I'm just big-boned", "I'll get around to it someday", "maybe it'll get better"... but when it comes to ourselves it's much harder, because we realise it's *us* that has to do the work to get past whatever it is... instead of somebody else's time/effort (which is as easy to spend as other people's money).
I am not immune to this myself, but whenever I find it happening in myself I tend to make an effort to getting rid of whatever it is I'm deluding myself about.
Obviously both can be abused. Lying to somebody can lead them into trouble, and telling too harsh a truth can indeed be needlessly hurtful - especially if a person is vulnerable, and simply needs comfort. Telling the truth about a person in front of other people can degrade their worth in the eyes of the others (and themselves). This is a Bad Thing.
Still, covering for another person's bad behaviour can mean that a person is not stopped from doing something they shouldn't - or never realises that they're being inappropriate (no, they don't always know!).
There is a place for truth and a place for tact, and it's a hard line to walk between the two.
IMO, though, society currently seems to place a heavy burden on the "play nice" aspect, and not enough on "keeping each other accountable".
The other argument about this is the lash-out defense of "it's none of your business". Who am I to tell other people to shape up? Especially since I'm so flawed myself. is this a "log in thine own eyes" situation?
To a certain extent this is the case. I certainly shouldn't feel high and mighty simply because I see a speck in your eye... but neither should I let you needlessly destroy your vision if you aren't aware of the issue.
It's absolutely my business to tell somebody that they need to learn to pick up the phone if leave me waiting for hours in the middle of nowhere, after they said they were going to pick me up. That situation doesn't have much of a grey area - but there are a lot of areas where it's more cloudy.
It's none of my business that a person is deluding themselves that their latest fad diet will work just as badly as all the others... unless they happen to be a friend that I care about and don't want to see them being unhealthy and eventually unhappy when their diet fails to work... again.
Is it my business? Yes and no. Should I find a tactful way of telling the truth? sure thing... but it will be the truth. The comforting lie will actually by more hurtful in the long run, to her health, to her self-esteem, to her chances of success at the very goal she has chosen for herself. In this sense, the comforting lie seems to only be less-hurtful in the short-term.
I believe this is true of most comforting lies. They cover-up a hurt to make life easier in the short-term, but the long-term harm is far more pronounced. On balance, I believe that only the truth will set you free.
 Introversion in the Myers-Briggs sense, an introvert is a person who regroups and regains their strength when they are by themself, rather than an extrovert who does so when in company. It is not actually the same thing as "being withdrawn" or even "being socially backward" - though these can be a consequence of too little interaction with others.
 Lying to children I think children are just as capable of bearing truths as adults, so long as they aren't frightening. Things that may make an adult fearful need not be so to children. eg death is a fact of life, but it needn't be something feared - of course you don't explain the scary details to a child as that will make it fearful.