Research into visual perception ultimately affects display design. Advance in display technology affects, in turn, our study of perception. Although this statement is too general to provide controversy, this paper present a real-life example that may prompt display engineers to make greater use of basic knowledge of visual perception, and encourage those who study perception to track more closely leading edge display technology. Our real-life example deals with an ancient problem, the moon illusion: why does the horizon moon appear so large while the elevated moon look so small. This was a puzzle for many centuries. Physical explanations, such as refraction by the atmosphere, are incorrect. The difference in apparent size may be classified as a misperception, so the answer must lie in the general principles of visual perception. The factors underlying the moon illusion must be the same factors as those that enable us to perceive the sizes of ordinary objects in visual space. Progress toward solving the problem has been irregular, since methods for actually measuring the illusion under a wide range of conditions were lacking. An advance in display technology made possible a serious and methodologically controlled study of the illusion. This technology was the first heads-up display. In this paper we will describe how the heads-up display concept made it possible to test several competing theories of the moon illusion, and how it led to an explanation that stood for nearly 40 years. We also consider the criticisms of that explanation and how the optics of the heads-up display also played a role in providing data for the critics. Finally, we will describe our own advance on the original methodology. This advance was motivated by previously unrelated principles of space perception. We used a stereoscopic heads up display to test alternative hypothesis about the illusion and to discrimate between two classes of mutually contradictory theories. At its core, the explanation for the moon illusion has implications for the design of virtual reality displays. Howe do we scale disparity at great distances to reflect depth between points at those distances. We conjecture that one yardstick involved in that scaling is provided by oculomotor cues operating at near distances. Without the presence of such a yardstick it is not possible to account for depth at long distances. As we shall explain, size and depth constancy should both fail in virtual reality display where all of the visual information is optically in one plane. We suggest ways to study this problem, and also means by which displays may be designed to present information at different optical distances.