In this paper we develop the convergence theory of a general class of projection and contraction algorithms (PC method), where an extended stepsize rule is used, for solving variational inequality (VI) problems. It is shown that, by defining a scaled projection residue, the PC method forces the sequence of the residues to zero. It is also shown that, by defining a projected function, the PC method forces the sequence of projected functions to zero. A consequence of this result is that if the PC method converges to a nondegenerate solution of the VI problem, then after a finite number of iterations, the optimal face is identified. Finally, we study local convergence behavior of the extragradient algorithm for solving the KKT system of the inequality constrained VI problem.