I hate to constantly refer to the Design Observer but there is this awesome article by Adrian Shaughnessy about whether jpegs are going to replace album covers in the years to come. MP3s are becoming more and more popular with the Ipod and Microsoft's Zune. With this, cd's are becoming less necessary and thus album art is less needed. What is also interesting is the commentary for the article regarding the environment and new breakthroughs in the jpeg album art such as animated album covers.
Are JPEGs the New Album Covers?
oh and i got the picture from here