Here is how Wikipedia defines this phenomenon:
The Moon illusion is an optical illusion in which the Moon appears larger near the horizon than it does while higher up in the sky. This optical illusion also occurs with the sun and star constellations. It has been known since ancient times, and recorded by numerous different cultures
A popular belief, stretching back at least to Aristotle in the 4th century BC, holds that the Moon appears larger near the horizon due to a real magnification effect caused by the Earth's atmosphere. This is not true. Although the atmosphere does change the color of the Moon, it does not magnify or enlarge it. In fact, the Moon appears about 1.5% smaller when it is near the horizon than when it is high in the sky, because it is further away by up to 1 Earth radius and also because of atmospheric refraction, which makes the image of the Moon slightly smaller in the vertical axis. (Note that between different full moons, the Moon's angular diameter can vary from 33.5 arc minutes at perigee to 29.43 arc minutes at apogee - a difference of over 10%.)
The angle that the full Moon subtends at an observer's eye can be measured directly with a theodolite to show that it remains constant as the Moon rises or sinks in the sky (discounting the very small variations due to the physical effects mentioned). Photographs of the Moon at different elevations also show that its size remains the same.
A simple way of demonstrating that the effect is an illusion is to hold a small object (say, 1/4 inch wide) at arm's length (25 inches) with one eye closed, positioning it next to the seemingly large Moon. When the Moon is higher in the sky, positioning the same object near the Moon reveals that there is no change in size.
Tonight, Wednesday June 18,2008, as the moon rises there will a fable older than Aesop, and an illusion of gigantic proportions that not even David Copperfield can claim.
Its been known and referred to as the MOON ILLUSION as far back as 4 BC; YEP! BC! Apparently as the moon rises it appears to be much larger at our horizon then when the moon reaches its peak overhead. ITS NOT TRUE, theres NO TRUTH TO IT; its simply an Illusion
The illusion will be particularly noticeable at this "solstice moon," coming just two days before summer starts in the Northern Hemisphere. The reason, according to NASA, lies in lunar mechanics: The sun and full moon are like kids on a see-saw; when one is high, the other is low. This week's high solstice sun gives us a low, horizon-hugging moon and a strong, long-lasting version of the illusion
It would seem that even Astronauts "see" the difference in size.
Here's how it works: Your mind believes things on the horizon are farther away than things overhead, because you are used to seeing clouds just a few miles above, but the clouds on the horizon can indeed be hundreds of miles away. So if we think something (such as the moon) is farther away, and it's not, then it seems larger.
If you remain doubtful, test the idea yourself. Go out at moonrise with a small object, perhaps a pencil eraser. Hold it at arm's length as the moon rises and compare the sizes of the moon and the eraser, then repeat the experiment an hour or two later when the moon is high in the sky. A rolled up tube of paper works well, too.
I hope you found this tidbit of otherwise "useless " information a soothing break to an otherwise busy busy day of sorting, researching, negotiating or whatever else you might be doing on the other end of this computer from ME!