A processing system for clearance estimation in a rotating machine includes one or more sensors and one or more digital signal processors for calculating the estimated clearance. The processing system may include techniques for obtaining real-time clearance estimates and techniques for obtaining averaged clearance estimates. Aspects of the processing system may also include a method of switching between real-time clearance estimates and averaged clearance estimates depending on the operating conditions of the rotating machine. Other aspects of the processing system include the use of two digital signal processors: a first digital signal processor configured to receive signals from a clearance sensor and perform a first set of high speed processing tasks, and a second digital signal processor configured to receive signals from the first digital signal processor and perform a second set of lower speed processing tasks.