The memory

That was Cameron's memory of Kirsten kissing him. She only remembers it from his point of view because she wasn't herself after the stitch that caused her to kiss him.

What she lied about was the fact that she knows he is in love with her because she felt it during the stitch. That's what the "I didn't know" was all about during the stitch.

As for why she lied, I think she wants to be sure of her feelings for Cameron before saying anything. She doesn't want to tell him she knows how he feels before she is sure if she feels the same or not. She doesn't want to hurt him that way if it turns out that she doesn't have those feelings for him.