I could not find any definitive description in PDE toolbox documentation. However, by trial and error I found that a function defined in a separate script file can be made to work. Write the initial condition function, say uic(), with inputs x and y, and return value equal to the desired u0 array. Then, in the solver parameter dialog box for u0, include the function name in quotes, i.e. 'uic(x,y)' and select OK. That's all.