I never really explained how the album art works, so I will do that now. First off lets look at the preferences:
Preferences -> General -> Album Art Preferences (near the bottom)
-Auto Download Album Art: Check this if you want gmmp to automatically query google images and try to find the art for the album (Internet connection is needed for this to work)
-Save in Lossless Format: Choose whether to save downloaded images as PNG or JPEG. Lossless = PNG
-Album Art Download Location: You shouldn't have to touch this unless you want to change where the art downloads to. By default art will download to [external storage]/gmmp/albumart. If you want to, you can specify the path and override the default
Preferences -> Now Playing
-Show Album Art: Check this to enable the now playing view to show the art in the background
Automatic Album Art Recognition:
Here is the flow that the now playing screen uses when trying to find the art:
1) The database is scanned to see if there is an image already set for the album
2) The file is checked for embedded art
3) The "Album Art Download Location" is scanned to see if the art was already downloaded (from a previous install). It searches for a specific filename so you cannot just put anything here.
4) If there still isn't anything found. The folder of the current playing song will be scanned for any images.
5) If the auto download setting is enabled, a query to google images is sent and the first valid image is used
If any of steps 3-5 actually succeeds, that image will be stored into the database as the image for the album.
Valid image formats: jpg, png, bmp, and gif (art embedded into the audio file is not currently supported, but will be in the future)
Manual Album Art Downloading:
From the Genre, Artist, or Album view, find the album you want to search for art. Press and hold on the album until the context menu comes up. Select "Album Art". You will be brought to a screen with a spinner at the top with 4 selections. Local Search, Google Image Search, Bing Image Search, and Current Image.
Current Image: If there is already art in the database for this album, this will be the default.. showing the currently selected image for the album
Local Search: Right now this will scan the folder your album is in for any images.
Google Image Search (Needs internet): Will send a query to google images and show the first 8-10 results. The downloads are not instant so if you see a box with a grey background, just wait a bit for it to download
Bing Image Search (Needs internet): Works the same way as the google image search, just uses a different search engine
How to select the image to use. If one of the searches returned some results, just scroll through to the image you want and press the select button. Now when you play anything from that album, the now playing screen should show the image in the background
edit: 07/11/11 updated instructions with embedded art support