Rat brain images acquired with a small animal positron emission tomography (PET) camera and reconstructed with the three-dimensional (3-D) ordered-subsets expectation-maximization (OSEM) algorithm with resolution recovery have better quality when the brain is imaged by itself than when inside the head with surrounding background activity. The purpose of this study was to characterize the dependence of this effect on the level of background activity, attenuation, and scatter. Monte Carlo simulations of the imaging system were performed. The coefficient of variation from replicate images, full-width at half-maximum (FWHM) from point sources and image profile fitting, and image contrast and uniformity were used to evaluate algorithm performance. A rat head with the typical levels of five and ten times the brain activity in the surrounding background requires additional iterations to achieve the same resolution as the brain-only case at a cost of 24% and 64% additional noise, respectively. For the same phantoms, object scatter reduced contrast by 3%-5%. However, attenuation degraded resolution by 0.2 mm and was responsible for up to 12% nonuniformity in the brain images suggesting that attenuation correction is useful. Given the effects of emission and attenuation distribution on both resolution and noise, simulations or phantom studies should be used for each imaging situation to select the appropriate number of OSEM iterations to achieve the desired resolution-noise levels.