I've read somewhere that with good vision you can resolve features on the scale of 500 arc seconds (0.1 degrees), or around 1/8 inch at 10 feet. But this is only true at the center of your field of view.
Then there's the issue of how fast your acuity drops off from the center of your field of view. Last October, Skip forwarded this to me, from a paper at www.acm.org
Visual acuity is the ability of the eye to resolve detail. The retina of eye can only focus on a very small portion of a computer screen, or anything for that matter, at any one time (Wickens 1992). This is because, at a distance greater than 2.5 degrees from the point of fixation, visual acuity decreases by half. Therefore, a circle of radius 2.5 degrees around the point of fixation is what the user can see clearly. In the GUI world, this is the Rule of 1.7 (Sarna 1994). At a normal viewing distance of 19 inches, 5 degrees translates into about 1.7 inches. Assuming a standard screen format, 1.7 inches is an area about 14 characters wide and about 7 lines high (Helander 1988). This is the amount of information that a user can take in at any one time, and it limits the effective size of icons, menus, dialogs boxes, etc. If users must constantly move their eyes across the screen to clearly focus, the GUI design is causing a lot of unnecessary and tiring eye movement.
According to studies cited by Jakob Nielsen, 300 dots-per-inch at typical reading distances may be a magic number for resolution — this is the resolution at which people can read as fast as reading old-fashioned typeset documents.