As a ship sails away from your vantage point on shore, it appears not only to get smaller with distance but also to sink below the horizon, the lower parts of the ship disappearing first. This is a consequence of the curvature of the Earth.
Here is a Demonstration that simulates this phenomenon. When the ship nears the horizon, you begin to view it through a telescope. You can then observe it dipping under the horizon until it disappears from view. For example, if your eyes are at an elevation of 1.7 meters (approximately 5' 7"), the visible horizon is about 5 km away. The ship will disappear from view at about 20 km. Because of refraction of light rays, you can actually see about 15% farther than the actual distance when the air temperature is 20°C.