In this paper we consider the nonlinear Fabry-Perot and its applications to optical signal and image processing. This paper addresses the signal processing aspects of a nonlinear Fabry-Perot interferometer with emphasis on image processing. The device geometry is shown in Figure 1. A thin nonlinear medium, whose refractive index is a function of the light intensity inside the Fabry-Perot is sandwiched between two plane parallel mirrors. The output as a function of input is shown in Fig. 2, for two different values of the difference between the Fabry-Perot low intensity resonance and the incident wavelength. The bistable curve in 2a is the origin of the term optical bistability and makes possible an optical memory, in which the output is a function of the history of the device. The Figure 2b represents a typical nonlinear transfer curve which may be used for signal processing. It can be seen that small changes in the input intensity Ic make large changes in the output intensity.