Summary: The problem of segmentation of a given gray scale image by minimization of the Mumford-Shah functional is considered. The minimization problem is formulated as a shape optimization problem where the contour which separates homogeneous regions is the (geometric) optimization variable. Expressions for first and second order shape sensitivities are derived using the speed method from classical shape sensitivity calculus. Second order information (the shape Hessian of the cost functional) is used to set up a Newton-type algorithm, where a preconditioning operator is applied to the gradient direction to obtain a better descent direction. The issue of positive definiteness of the shape Hessian is addressed in a heuristic way. It is suggested to use a positive definite approximation of the shape Hessian as a preconditioner for the gradient direction. The descent vector field is used as speed vector field in the level set formulation for the propagating contour. The implementation of the algorithm is discussed in some detail. Numerical experiments comparing gradient and Newton-type flows for different images are presented.