Laidlaw was born in 1960 and raised in Laguna Beach, California and attended the University of Oregon, where he tried, and was discouraged by, punched card computer programming. He wrote short stories and his first novel, Dad's Nuke, was published in 1985. This was followed by several more novels over the next decade, but he worked as a legal secretary in San Francisco for a living.

Laidlaw had played computer and arcade games, but was not intrigued. It was not until Myst that his perception of these games changed. He obsessed over Myst and bought a new computer so that he could play it at his San Francisco home. With his new-found interest, he wrote The Third Force (1996), a tie-in novel based on the world created by the Gadget computer game. His favorite PC game of all time is The Dark Project. (interview)

Working with game designers led him to feel that he wanted to help design an actual game. He joined Valve Software while they were developing Half-Life (1998) and worked on the game's story and level design. At Valve, he later worked on Half-Life's expansions and Half-Life 2.

He shares an office at Valve with the creators of Old Man Murray, Erik Wolpaw (winner of the 2006 GDC award for co-writing Psychonauts) and Chet Faliszek (Winner of 2009 Bafta Award for Left 4 Dead).

• 400 Boys (1983), published in the Mirrorshades anthology
• Dad's Nuke (1985)
• Neon Lotus (1988), nominated for the 1988 Philip K. Dick Award
• Kalifornia (1993)
• The Orchid Eater (1994)
• The Third Force (1996), Gadget game tie-in
• The 37th Mandala (1996), nominated for the 1997 World Fantasy Award and awarded the 1996 International Horror Guild Award

Laidlaw has also written dozens of short stories.

He has a series about a bard named Gorlen, who has been cursed with a Gargoyle hand:

• Dankden (October/November, 1995, Fantasy and Science Fiction Magazine)
• Catamounts (September, 1996, Fantasy and Science Fiction Magazine)
• Childrun (August, 2008, Fantasy and Science Fiction Magazine)
• Quickstone (March, 2009, Fantasy and Science Fiction Magazine)
• Songwood

The books, The Orchid Eater, The Third Force and The 37th Mandala, are present inside Gordon Freeman's locker in the first level of the Half-Life computer game, presumably as a reference to Laidlaw's involvement in the plot and level design. Also, in the locker room, there is a locker with the name "Laidlaw" on it.

A book, supposedly by Laidlaw, The Extreme Aggrotato, is seen in Half-Life 2 in Dr Eli Vance's lab.