Level set values for a cartesian grid
 

Hi!
Can please someone tell me how to compute the level set values for a rectangular domain containing a circle as obstacle inside. The grid is cartesian and I would just like to compute the value of PHI for all points of the domain: I mean there should be negative values for the fluid region, positive for the solid region and zero values for the boundaries.
I haven't found any useful book or article on this topic which is very wide spread...
Thanks for your help.