Lhii was a mythical Matoran created by Turaga Vakama to keep the memory of Toa Lhikan alive without revealing the secrets of Metru Nui to the Matoran. With the revelations about Metru Nui, the Matoran then knew that Lhii never existed on Mata Nui.1
Notes
Lhikan was Lhii the Surfer.2
The whole story of Toa Lhikan being a Matoran on Mata Nui named Lhii was made up by the Turaga, because Jaller did have some connection to him, and they could not tell the truth about him because then they would have to reveal all about Metru Nui, which they did not want to do.3