A lot of applicants definitely exaggerate their volunteering and activities. While something like rounding up your volunteer hours or exaggerating your leadership role in a club most likely won't get you in trouble, outright lying could destroy your app. Rounding your 495 hours of volunteering to 500 is probably not going to be questioned, but if you said you did 1000 when you really did 100, that could be bad. Odds are the adcom doesn't find out, but there are horror stories of students being kicked out during their fourth year because they lied about something on their application. It's not worth the risk, especially when you have to provide a contact for each activity.
The activities section is where you want to talk about your interests and should be things you could talk about passionately during your interview. Sure you need to tick off the X hours of research, X hours of volunteering, etc., but past that it's important to talk about the activities that really define who you are. I talked about a volunteer volleyball coaching position I had, and my interviewer at my dream school picked that out of everything in my application to ask me about. We talked about it for half the interview, and I ended up getting accepted! Had I instead listed something a little "flashier" that I didn't care about, I wouldn't have been able to interview nearly as well about it. This is just my two cents as someone who just completed an admissions cycle, take everything I say with a grain of salt.