I'm talking compared to Earth. I was aware that it's pretty small as far as stars go.
No, it's not an illusion. We are relatively close to it when compared to the bulk of the solar system, but it is still 93 million miles away. That is a rather huge distance. It may not sound far, but consider that at the speed of light, 186,000 miles per second, it takes the light from the sun over 8 minutes to reach us.
The moon is much closer to us and averages around 275,000 miles away making the apparent size the same as the sun. That's why a total solar eclipse is so spectacular. The moon completely covers the sun and creates the "ring of fire."
The further out you go into the solar system, naturally the sun's apparent size starts getting quite small. From the orbit of Neptune, it is only a bright dot against the backdrop of other Milky Way stars.