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Hi Arta,

Nice question.

A: SOMETHING is an optical illusion.

B: What?

A: (The fact) THAT the moon appears.... is an optical illusion. 

Here's your sentence again:
 

• IT is merely an optical illusion THAT the moon appears considerably larger at the horizon than it does overhead.

Here's another example: That you asked your question here in this forum is a nice thing.

And finally the definition and examples from Longman Dictionary of Contemporary English:

that 2   S1   W1  / ðət /   conjunction 

3 used to introduce a  clause  that refers to a fact, when describing it :  
It’s odd that I haven’t heard of you. 
That anyone should want to kill her was unthinkable. 
The problem is that no-one knows what will happen. 

Hope it helps.