Liliana discard with hands revealed.
Choices are made privately, so the nonactive player does not know which card the active player chose when making his or her choice.
Even though all cards in hand may be revealed, the hand is still is a hidden zone, so rule 101.4a still applies.
Players can't usually completely trust each other when doing a hidden choice. If I look at my hand, say “I choose that one”, then you make you choice, then we both discard, there is always a chance I discard another card than the one initially chosen (maybe I saw you took the rightmost card and that gave me a hint? There's no way to prove anything). Because of this, the usual way of doing this in practice is setting aside a card face-down, then revealing it when the opponent has also put a card aside. But this is not in the rules, it's just a practical way of implementing them.
Having hands revealed doesn't prevent, in theory, hidden choices. But the usual way is flawed here - I'll see what you're putting aside.
So I suggest that for the sake of making your choice your temporarily hide your hands (and shuffle them!) before revealing them again when Liliana's effect has been resolved.
Daniel Kitachewsky
L3, Paris, France
Rules Netrep