Hang a Big Moon

Good astronomy: The Moon does appear larger on the horizon, but it is because of the way we perceive the sky.

This is the famous 'Moon Illusion', and is also true for the Sun. The most common misconception is that it is because you are unconsciously comparing the Moon to foreground objects like trees and houses, or even the horizon itself, and that makes the Moon look bigger than when it is all alone in the sky. This turns out to be false. As it happens, there are already excellent descriptions of this effect on the web. Probably the best is by Donald Simanek, Professor of Physics at Lock Haven University of Pennsylvania, and another very good one is by Carl Wenning, from the Illinois State University.

In addition, you have probably seen that the rising or setting Moon looks very red. This is the same reason the sky is blue, and following that link will show you why!

One more thing: someone on sci.astro mentioned the book called "The Cognitive Brain", by A. Trehub (MIT Press, 1991), which has a chapter dealing with the Moon Illusion. I have not read this reference (my library doesn't have it!) but those of you at Universities might be able to find it. Evidently, this book also confirms the explanation in the above link.