What was going on when I was born?

Officials today lifted most of the wateruse restrictions imposed on the 300,000 customers of the Jersey City Water Department on Saturday, but left in place, at least temporarily, the requirement that all drinking water be boiled for five minutes. The water system had been shut down Friday so workers could repair a break in one of the two 72-inch aqueducts from the Boonton Reservoir in Morris County, 26 miles away. The rupture of the pipe occurred Thursday near Harmon's Cove in Secaucus, spilling millions of gallons of water into the Hackensack Meadowlands. The officials are awaiting results of bacteriological tests of the water by the Department of Environmental Protection. They permitted restaurants, taverns and other eating places to open, provided that bottled or boiled water be used for drinking, cooking and washing.

The intruder who surprised Queen Elizabeth in her bedroom at Buckingham Palace 10 days ago will not be prosecuted because he did not commit a criminal offense, the British authorities announced today. The reason, they explained, is that in Britain trespassing is a violation of civil law, but not a crime. The Government decision coincided with a second startling disclosure involving security at Buckingham Palace - an announcement that the police officer in charge of protecting the royal family had resigned after acknowledging that he had had a homosexual relationship with a male prostitute for a number of years. Public Outrage at the Incident These new developments rekindled the fascination and outrage that have gripped a British public aghast that Michael Fagan, a 30-yearold unemployed laborer, was able to spend 10 minutes chatting with the Queen in her bedroom, unbeknown to security men. The disclosure about Mr. Fagan came as he was charged in a London magistrates' court with having entered the palace on a previous occasion, on June 7, and stolen a bottle of wine, as well as with theft and assault arising from other, unrelated incidents.

ANN ARBOR, Mich. ''SMALLER is better'' is the motto these days at the University of Michigan. Faced with severe budgetary problems induced by the state's economic troubles, the school has already eliminated its geography department, and the departments of art, natural resources and education could be the next to go. But at the University of Michigan Law School, things have never been better. The lawn in the middle of the Law Quadrangle, ravaged by generations of touch football players and Frisbee throwers, has recently been resodded; the slate walkways between the Legal Research Building, the Lawyers Club and Hutchins Hall have been relaid. The most impressive feature, moreover, is barely visible: the new underground law library, designed by Gunnar Birkerts, which opened last fall. For a state institution like the University of Michigan, the dramatic new building, a kaleidoscope of light and mirrors and sky, is a financial as well as an architectural feat. It cost $9.5 million, and not a penny of the price was borne by the taxpayers.

An article yesterday about summer cultural events in New York City was accompanied by an outdated photo- graph. The actor Barry Bostwick has been replaced by John Vickery in ''The Death of von Richthofen as Wit- nessed From Earth.''

The Federal Reserve Board lowered its discount rate to 11 1/2 percent from 12 percent. Analysts said other interest rates may now drop slightly in the next few weeks. (Page A1.) Interest rates in the credit markets declined, with those for Treasury bills falling to their lowest levels since last December. (D16.) Manufacturers Hanover Trust and First National Bank of Chicago lowered their prime lending rates a half point, to 16 percent. (D16.) George L. Ball has resigned as president of E.F. Hutton Group to head a new Prudential Insurance subsidiary that includes the Bache Group. The appointment of the 43-year-old Mr. Ball, widely viewed as one of the most effective and innovative managers on Wall Street, appeared to signal that Prudential is dissatisfied with the progress of Bache a year after its acquisition. (D1.)

WHEN a former Congressional page made sensational allegations about sexual misconduct on Capitol Hill last month, Federal agents turned to a trusted investigative tool - the lie detector. They hooked up 18-year-old Leroy Williams of Little Rock, Ark., to a lie detector, asked him a series of questions and concluded that he had made deceptive replies. When Pentagon officials were embarrassed by a leak of sensitive budget information in January, they also turned to the lie detector. After administering lie detector tests to more than two dozen senior officials, they concluded that one had flunked three separate tests and told him he would be dismissed. Only after the suspect produced sworn denials from everyone he had been accused of leaking to did the Pentagon back down and let him off with a reprimand. It had become clear that, in this case at least, the Pentagon's lie detector had told a lie.

New York City declared a water-pressure alert yesterday and Consolidated Edison said it had delivered a record amount of electrical power as the metropolitan area endured its fourth straight day of searing heat and high humdity. The temperature soared to a high of 96 degrees at 2:35 P.M. But by 7 P.M., with storm activity in the region, it was down to 84. The forecast was for cooler weather today with less humidity. Thomas Grant, a meteorologist with the National Weather Service, said that a cold front moving in from the west should drop the peak temperature into the high 80's.

The Chrysler Corporation, profiting from its vast cost-cutting program and the sale of profitable luxury cars, yesterday reported a second-quarter net income of $106.9 million, or $1.34 a share. The nation's No.3 auto maker, which was tottering on the brink of bankruptcy three years ago, earned a profit despite slightly lower sales, an indication that it had some success in reducing the size of the company and thereby the number of vehicles it needs to sell to break even. Unlike the first quarter, when the sale of its tank subsidiary helped to turn a loss into a $149.9 million profit, Chrysler's second-quarter profit resulted primarily from selling cars, trucks and parts. It consisted of $104.3 million from operations - its highest quarterly gain from vehicle sales since 1976 - and $2.6 million in earnings from a tax-loss carryforward.

With Iranian and Iraqi forces apparently stalemated after six days of fighting in southern Iraq, Iran has begun a political offensive in the Middle East apparently intended to allay fears that it poses a threat to other Persian Gulf countries. Calling their forces' invasion of Iraq a ''defensive operation,'' Iranian leaders have declared in official statements and broadcasts that nearby nations should not feel threatened by Iran. American officials said that the statements by Iran's Prime Minister, Mir Hussein Moussavi, and by the Speaker of Parliament, Hojatolislam Hashemi Rafsanjani, were apparently intended to dispel the fears of Saudi Arabia and other nations that Iran might turn against them if it defeated Iraq.

Morton-Norwich Products Inc. said yesterday that it had signed a definitive agreement to acquire the Thiokol Corporation, a manufacturer of rocket propulsion systems and chemicals, in a cash and stock transaction valued at $540 million. Both Morton-Norwich, a Chicago-based chemicals and consumer products manufacturer, and Thiokol make specialty chemicals that are used in the electronics industry, particularly as etching substances and coating materials for semiconductors. A formal statement, made jointly by Charles S. Locke, chairman and chief executive officer of Morton-Norwich, and Robert E. Davis, chairman and president of Thiokol, said ''specialty chemicals will represent the largest segment of the new company, with annualized sales of approximately $600 million.'' Morton-Norwich's announcement comes a month after it completed the sale of its pharmaceuticals division to Procter & Gamble for $371 million. At the time, Morton-Norwich said it was seeking an acquisition that would complement its chemicals business. The company had sought to sell its small but profitable pharmaceuticals business because of the big research and development costs associated with that industry.

''If the Americans will make up their minds to negotiate directly with the P.L.O., the question of where they go will not be a problem.

MAMMOTH LAKES, Calif. DAN MILLER, a geologist, hacked at the slope with an army trenching tool and set off a small avalanche. The fine soil, shaken free, slid downhill in a rush, carrying with it pumice stones the size of popcorn, flakes of obsidian and chunks of basalt. Another hack, another avalanche. This is not solid ground. Digging deeper, Dr. Miller found what he was looking for, layers of debris left by succeeding volcanic eruptions that have periodically devastated the surrounding landscape over the last 2,000 years - which is why this is not solid ground. These faint gradations in color and texture testify to lava flows and ash falls, mudslides and swift surges of hot rock. The way Dr. Miller reads this stratigraphic record, the land here seems vulnerable to one or another of these volcanic phenomena every 200 to 300 years.