Many years ago I came across an article assessing the various theories about this, and decided (as did the author, I believe) that the following is the correct explanation (I don't remember who the article said first thought of it): When you look up at the sky, you automatically envision it as bowl-shaped, the sky directly above your head seeming closer than the sky near the horizon. This is because the earthly objects at the horizon "push" the sky away from you visually, forcing you to see it as it is--something that is really miles away at least. This effect is absent above your head, unless some skyscraper is included in your visual field when you look up. (Somewhere, Ayn Rand mentions this: she refers to buildings "pushing the sky up" for one of her characters.) Thus, when you see the moon against the bare sky above you, you think it is closer than when it is near the horizon, and since it occupies the same area in your visual field in both cases, the effect is that the moon is bigger on the horizon. EDIT: Oh, I see this is the aforementioned "Ponzo illusion," but anyway I think it is correct. I'll leave this in, in case it might sway any remaining doubters.