Light enters the eye through the cornea and iris and is focussed by the lens onto the surface of the retina. The retina is covered by a thin layer of light receptors. There are two kinds of receptors: rods and cones. Rods are fairly high-speed receptors, that have no colour sensitivity and are active in low-light situations. 120 million rods are spread out throughout the retina. Rods are joined to nerves in groups of about 100 cones per nerve, which increases their light sensitivity, but reduces their resolution.
Cones are less sensitive to light but are sensitive to colour. There are about 6 million cones in the retina mixed in among the rods, with the density of cones increasing towards the center of the retina. At the very center is a small pit called the fovea filled with a very high density group of about 30,000 cones. In most of the retina approximately 5 cones are connected to a nerve, but in the fovea, each cone is attached to a single nerve. The image of the moon seen with the naked eye from earth fills about 1/2 of the fovea. The fovea is used for all detailed vision, and the eye moves all the time to bring the area of interest into the fovea.
A simulation of the resolution of the retina showing the detail of the fovea.
It is difficult for us to feel the relative lack of resolution outside of the fovea because higher level processing in our vision system skillfully masks it from us.
In addition to these larger movements of the eye, the eye is constantly vibrating at a rate of between 30 and 70 cycles a second. These tiny movements are essential to vision because the rods and cones on the retina are not sensitive to actual levels of light, but only to changes in luminance. Therefore, the eye is actually registering local differences in the image, in other words, the eye is primarily detecting edges.