The Stolen Valor Act of 2005 was signed into law in 2006.
I believe it survived unchallenged into 2010. In July 2010 the US District Court in Denver declared the Act unconstitutional on grounds it violated the First Amendment's protection of free speech.
March 2011: The U.S. Court of Appeals for the Ninth Circuit refused to rehear the 2010 case (United States v. Alvarez). That court asserted that the variety of speech exempt from standard constitutional scrutiny such as fraud, fighting words, defamation, incitement, and speech attendant to the commission of a crime which are not per se entitled to First Amendment protection, does not include false representations (lying).
2010 thru 2012 there was much activity in the US District Court system on this topic. (This would be where Al Norris could summarize better than I.)
Fast forward to June 28, 2012: the SCOTUS held (6-3) that the Stolen Valor Act was an unconstitutional abridgment of the freedom of speech under the First Amendment.
In short, the protection of, and the right to, free speech is directed at speech we don't like, not speech with which we agree.
In response to the SCOTUS action, DoD has established a website (valor.defense.gov) to track recipients of awards and decorations of the United States military. Eventually The Pentagon hopes to expand it to become much more comprehensive.
Once I got to looking up this topic, I was fascinated by the course of events and rationale espoused by the various courts and judges.
[Disclaimer: There are plenty of partial quotes here from Wikipedia along with corroboration from traditional news and congressional tracking websites. (CNN, etc.)]