Two basic Lie-invariant forms uniquely defining a generic (hyper)surface in Lie sphere geometry are introduced. Particularly interesting classes of surfaces associated with these invariants are considered. These are the diagonally cyclidic surfaces and the Lie-minimal surfaces, the latter being the extremals of the simplest Lie-invariant functional generalizing the Willmore functional in conformal geometry. Equations of motion of a special Lie sphere frame are derived, providing a convenient unified treatment of surfaces in Lie sphere geometry. In particular, for diagonally cyclidic surfaces this approach immediately implies the stationary modified Veselov-Novikov equation, while the case of Lie-minimal surfaces reduces in a certain limit to the integrable coupled Tzitzeica system. In the framework of the canonical correspondence between Hamiltonian systms of hydrodynamic type and hypersurfaces in Lie sphere geometry, it is pointed out that invariants of Lie-geometric hypersurfaces coincide with the reciprocal invariants of hydrodynamic type systems. Integrable evolutions of surfaces in Lie sphere geometry are introduced. This provides an interpretation of the simplest Lie-invariant functional as the first local conservation law of the (2+1)-dimensional modified Veselov-Novikov hierarchy. Parallels between Lie sphere geometry and projective differential geometry of surfaces are drawn in the conclusion.