Detection of rotationally distorted targets is a challenging task in pattern recognition applications. Recently, we proposed and implemented a wavelet-modified maximum average correlation height (MACH) filter for in-plane and out-of-plane rotation invariance in hybrid digital-optical correlator architecture. Use of wavelet transform improved the performance of the MACH filter by reducing the number of filters required for identifying a rotated target and enhancing the correlation peak intensity significantly. The output of a hybrid digital-optical correlator contains two autocorrelation peaks and a strong dc. To capture a desired single autocorrelation peak a chirp function with the wavelet-modified MACH filter was used. The influence of perturbations in hybrid digital-optical correlator has also been studied. Perturbations include, the effect of occlusion on input target, the effect of additive and multiplicative noise and their combined effect on input target, and the effect of occlusion of product function to be optically processed for obtaining the correlation outputs. The present paper reviews investigations on the hybrid digital-optical correlation scheme with special reference to the work carried out at the Photonics Division, IRDE Dehradun.