Light doesn’t just come into your eyes straight on, it comes in at an angle. The field of vision for a single eye is around 135 degrees horizontally and 180 degrees vertically.
The further away from your eye, the more horizontal and vertical distance is covered by that angle. That is, the farther away you’re looking, the more you can see.
So while a further away object is the same absolute size it is smaller relative to your entire field of vision.
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