This paper discusses contrast degradation in projection displays that use the Digital Micromirror DeviceTM (DMDTM) of Texas Instruments. Various possible mechanisms for the degradation of the contrast ratio are investigated by using optical ray-trace simulations and performing some experiments. It is found that the scattering of light at the DMD is the principal source of contrast degradation. This scattering is implemented in our simulations of the DMD projector in the optical ray-trace program ASAP. This enables us to simulate the contrast ratio in a realistic way. Two methods to improve the contrast ratio are proposed. Both methods, however, reduce the total light transmission of the projector. These methods are illustrated with our simulation model, and quantitative results are given.