The Collaborative International Dictionary of English v.0.48:

Exaggerate \Ex*ag"ger*ate\, v. t. [imp. & p. p. Exaggerated;
   p. pr. & vb. n. Exaggerating . ] [L. exaggeratus, p. p. of
   exaggerare to heap up; ex out + aggerare to heap up, fr.
   agger heap, aggerere to bring to; ad to + gerere to bear. See
   Jest. ]
   1. To heap up; to accumulate. [Obs.] "Earth exaggerated upon
      them [oaks and firs]." --Sir M. Hale.
      [1913 Webster]

   2. To amplify; to magnify; to enlarge beyond bounds or the
      truth; to delineate extravagantly; to overstate the truth
      concerning.
      [1913 Webster]

            A friend exaggerates a man's virtues. --Addison.
      [1913 Webster]

WordNet (r) 3.0 (2006):

exaggerate
    v 1: to enlarge beyond bounds or the truth; "tended to
         romanticize and exaggerate this `gracious Old South'
         imagery" [syn: overstate, exaggerate, overdraw,
         hyperbolize, hyperbolise, magnify, amplify] [ant:
         downplay, minimise, minimize, understate]
    2: do something to an excessive degree; "He overdid it last
       night when he did 100 pushups" [syn: overdo, exaggerate]