Myself and Aditya (now 5 years and always inquisitive) were watching the moon on Saturday (Shravana purnima) and taking the above photograph with my sony digicam.
He asked my why the moon looks bigger when it begins to rise and why it appears small when it reaches up the sky.
I told him that - the light rays travel at an angle and hence the moon appears big when it begins to rise. But when moon reaches high up, the light rays travel vertically, so it appears small.
He pondered over it for few minutes. Then he asked me, 'when it is nearer'.
I told him that he is at the same distance both the times.
He appeared confused and asked, "if he is at same distance both the times, why the rays have to travel at angle"
I explained with some rough drawings. To my relief, he was pacified to some extent.
To refresh my physics, I searched the internet and found so many explanations to answer the illusion...only the 'possible explanations'..! My awareness (and the resultant confusion) is elevated regarding the subject...!
One interesting link is from wikipedia : http://en.wikipedia.org/wiki/Moon_illusion