One theory about the moon illusion says that when the moon is near the horizon we perceive the moon's distance to be farther away from us than when it is high in the sky. But since the moon is actually the same size, our minds make it look bigger when it is near the horizon to compensate for the increased distance.
One way that you can convince your mind that it's just an illusion is to bend over at the waist and look at the moon upside down through your legs.
An alternative explanation holds that the moon illusion is caused by the way our eyes focus on distant and close objects. When we focus on the horizon moon, we focus on the moon at a great distance. The overhead moon lacks visual cues that tell us how far away the moon is, so we focus on the moon as if it was a short distance away. See here for the details of this theory.
So, for now, the right answer is that there is no right answer. But the one thing people agree on is that the moon does not physically change its size or distance from Earth at any point during the moon's orbit; it's an optical illusion. It's all in our heads.
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This article was updated in conjunction with AI technology, then fact-checked and edited by a HowStuffWorks editor.