Here's why:
* The Sun is vastly larger than the Moon. The Sun's diameter is about 109 times larger than the Moon's.
* The Sun is much farther away from Earth. The Sun is about 93 million miles away from Earth, while the Moon is only about 238,900 miles away.
The reason we perceive them as being similar in size is due to a fortunate coincidence of their relative distances and sizes. The Sun is so much farther away than the Moon that its apparent size in the sky is reduced to almost the same size as the Moon.
Here's a helpful analogy: Imagine you have a dime and a quarter. Hold the dime close to your eye and the quarter far away. They will appear to be roughly the same size.
This coincidence allows for total solar eclipses, where the Moon completely covers the Sun's disk. If the Moon were much smaller, it would not be able to cover the Sun entirely, and we wouldn't witness the spectacular phenomenon of a total eclipse.