We have observed a large optically induced absorption in porous silicon. The figure of merit for third order optical nonlinearity is of the order of 10(-3) (esu . cm), a value as large as that of a photorefractive material such as BaTiO3. By exploiting this phenomenon, we have made simple demonstrations of optical hysteresis, parallel image processing and all-optical logic gates. These results point to the possibility of expanding the applications of Si semiconductors from electronics to all-optical technologies.