A hybrid correlation system incorporates an optical correlator, spatial light modulators(SLM), digital cameras and a computer. Spatial light modulators and cameras are used to dynamically update the input and the spatial filter. The hybrid correlation system integrates the parallel processing capability of the optical correlator and the flexibility of the digital system. It can be used as a high-speed multi-function information processor. This paper focuses on the design and fabrication of a hybrid optical correlator and how it is used as an intelligent instrument. We address the issues of rigorous requirements for filter registration and matched filtering by proposing practical approaches. We include the analysis and use of intensity filters based on commercial SLMs for real-time pattern recognition. We present the engineering details of a specific hybrid optical correlator for applications to the real-time identification of an aircraft.