First of all you need to make sure that the property "Show cover images" is turned on in the settings dialog.

Secondly, cover images must be in jpg format and they must be placed in the same folder as the mp3 files. The image file must be named the same as the folder it is placed in.

Ex. Your music is placed in C:\Music\Abba\Gold\*.mp3. To get the cover art to work, place the image like this: C:\Music\Abba\Gold\Gold.jpg

You could also use the “Find cover art” function, by right-clicking a song and select “Find cover art”

NOTE: At the moment coveres embedded inside the music files are not supported...