(this page is mostly a placeholder at the moment; for an exhaustive (and exhausting) explanation of the moon illusion, visit Donald Simanek's discussion; for a summary of my personal views, which will be turned into a more thorough discussion as this page is revised and completed, see the next couple of paragraphs)
To many people, the Moon appears much larger when rising or setting than when it is higher in the sky. This effect is particularly pronounced when the horizon appears far away. In reality, the Moon's image is actually SMALLER when it is on the horizon, than when it is higher in the sky; as a result, this phenomenon is an illusion. No explanation of the Moon Illusion has general acceptance, but this page (when revised and completed) will hew to the following theory:
Things seen at large distances appear smaller than nearby things (that tiny lion sitting over there is probably just as big, but further away than that huge one, hungrily eyeing us). Almost everyone is aware of this "perspective" effect; but not as many are aware that our brain automatically corrects for the effect, to a certain extent -- that is, things that are further away look smaller than nearby things, but not as small to our brain as on our retinas. For reasons to be discussed below, which are more or less obvious without discussion, the horizon appears further away than the sky appears high, so when the Moon is on the horizon it appears further away, and our brain "adjusts" the image sent to it by our eyes, to tell us that it is really larger than what we see.
I favor this theory because (1) when we look at distant mountains, they appear larger than in snapshots taken at the same place and (2) on planetarium domes, showing the Moon and Sun at their correct size makes them look much smaller than they do in the sky. In the planetarium, we can tell that the images are much closer to us than in the sky, and even though they are the right size on our retina, they look far too small to our brains. (At LBCC, we have to show the Moon and Sun four times their correct size to approximate their appearance in the sky.) This seems to be corroborated by the fact that constellations also look smaller on the planetarium dome than in the real sky, even though their angular size is actually the same.
The Flattened Appearance of the Sky
To be written when time permits. Leads into...
The Moon Illusion
Images Related to the Moon Illusion (and Atmospheric Refraction)
To be written when time permits. A more thorough explanation, with diagrams and photographs, of the summary above.
A series of images taken by astronaut Don Pettit from the International Space Station, showing the full moon "setting" on April 16, 2003 (the "setting" being caused by the orbital motion of the Space Station). As a celestial object's light passes through our atmosphere it is bent, or refracted, making it appear thigher than it really is. As the object nears the horizon, the amount of refraction rapidly increases, so as the Moon sets, its lower limb is "lifted" more than the top, making the Moon appear vertically squashed (but leaving its horizontal width unchanged). Scattering of light by the atmosphere, greater at shorter wavelengths than longer ones, also makes the Moon look redder as it descends. The same phenomena are observable on the Earth, but because the setting Moon is "below" the Space Station, the effects are doubled, compared to the view from the ground (shown below). (Don Pettit, Les Cowley, ISS, NASA)
The full moon of December 1990 setting, as seen from the STS-35 Space Shuttle mission (the setting being due to the motion of the spacecraft around the Earth). The image posted on APoD was taken as the shuttle passed "under" the Earth. To make it look more normal, it was rotated 180 degrees; however, that made the features on the Moon backwards from their actual appearance, so the image posted here has been restored to its original appearance. The space-based image has an advantage over Earth-based pictures of the rising moon, due to the relative lack of air between the Shuttle and the Moon. Namely, the rising or setting Moon often looks reddish, due to scattering of the shorter wavelengths of light by our atmosphere (see the image below, taken from the Earth's surface); while in this image it is shown in its natural color. (STS-35 Crew, NASA, apod020921)
Other topics -- atmospheric refraction: flattening of Moon/Sun when near the horizon, color fringing of objects near the horizon, atmospheric extinction. Example: image of Moon showing orange color due to extreme scattering of shorter wavelengths, flattening and color fringing due to atmospheric refraction.
The full moon of November 16, 2005 setting in the North, as viewed from Antarctica. (James Behrens (IGPP, Scripps Institution of Oceanography), apod051125)