Polarization mode dispersion (PMD) severely degrades images of biological tissue measured with polarization-sensitive optical coherence tomography. It adds a bias to the local retardation value that can be spatially confined, resulting in regions of seemingly high sample birefringence that are purely artificial. Here, we demonstrate and analyze this effect, both experimentally and with numerical simulations, and show that artifacts can be avoided by limiting the system PMD to less than the system axial resolution. Even then, spatial averaging over a dimension larger than that characteristic of speckle is required to remove a PMD-induced bias of the local retardation values. (C) 2013 Optical Society of America