Delusional embellishment. My experience with evangelicals is that the testimony gets more intense as time goes on. The glassy-eyed oohs and aahs that the teller gets from fellow believers reinforces the narrative. I think many come to believe the story that they tell.
I do not believe that habitual liars begin to believe their embellished, or completely made up, stories. Not for one second. They are just very good liars.