If you think people are actually interested in the lie when they ask questions like that, you've missed the subtext. They aren't interested in the answer. They know the answer. They want you to make an effort to make them feel good.
You should be flattered when somebody asks you a question like that. It means they want you to care about them. That you would resort to the brutal response might hurt them but it gives them good advice: steer clear of you.
Doesn't the reason for asking that question depend heavily on context? If your wife asks you that as she's getting dressed in the morning, she may well be asking for honest(-ish) feedback to avoid looking fat all day at work. It deserves a very different sort of consideration than if she's asking you that on your dinner date.
Or have I been getting this wrong for the last decade?
Doesn't the reason for asking that question depend heavily on context?
Yes, it does. Maybe you and your wife are so close you can be brutally honest with each other and it doesn't hurt your relationship. The same advice might not apply to Sally from accounting, however.
You should be flattered when somebody asks you a question like that. It means they want you to care about them. That you would resort to the brutal response might hurt them but it gives them good advice: steer clear of you.