During pursuit eye movement, a stationary background projected on the retina shifts in the direction opposite to that of the eye movement. This complicates the perception of objects because during an eye movement the retinal and head-centric motions differ. Nevertheless, our visual system is somehow able to compensate for the added eye motion so that the world is perceived as stable. The eye movement compensation is traditionally assumed to consist of a combination of a retinal motion signal and an extra-retinal estimate of eye velocity (Von Holst & Mittelstaedt, 1950; Sperry, 1950). This view has been expanded upon by a number of researchers in the last few decades with the introduction of vector addition-like models. However, it is not well known how closely the eye movement compensation mechanism follows the rules of vector algebra. Evidence for the presence of a signal coming from the moving eye has come from a variety of neurophysiological and perceptual research on the cortical Medial Superior Temporal (MST) area in primates. Previous studies have shown that the spatio-temporal structure of the background plays an important role in the perceptual accuracy of the velocity of a moving object in the visual field. Background characteristics have been shown to influence not only the retinal signal, but also the extra-retinal signal to some degree. The current thesis provides new information on factors that affect the degree of compensation for retinal motion during smooth pursuit eye movement. The findings are based on several experiments that were designed to use a range of pursuit target and stimulus dot velocities across different backgrounds and stimulus exposure times, in order to reveal details about how the retinal and extra-retinal signals are combined. Participants were asked to determine the direction of a moving stimulus by rotating an arrow on the screen. In a separate experiment, participants were also asked to assess the speed of a stimulus using a magnitude estimation task. A linear vector model was developed to separate the retinal and extra-retinal signal contribution to the overall compensation. This model was used to assess the degree of perceptual stability across different visual conditions. Generally, the data indicate that the perceived stimulus motion is well predicted by a vector subtraction mechanism postulated to be occurring in the human brain. However, in situations where there is weak visual stimulation, participants’ estimates of motion are less accurate and tend to follow the retinal image motion. In the current thesis I identify how the type of background, directions of eye movements, and stimulus velocities relative to the eye movements affected participants’ perceptual performance. Based on the data and the model fitting, it was concluded that the visual system appears to utilize the eye-movement related signal differentially depending on the retinal motion content.