Because the iPod has a monochrome (black and white) screen, it does not display album artwork itself. For many (or most) songs in your iTunes library, like songs purchased from iTunes Store and those with album artwork from the Get Album Artwork command, the album artwork is kept in a database that is separate from the song files. For those songs, iTunes is probably not syncing album artwork to an iPod that can't display it.
You can also embed album artwork in the song's file, when you do a Get Info on the song and add album artwork manually to the song in the Info window. You might do this if iTunes cannot supply the artwork for a song, or if the one iTunes gets for it is wrong. For those songs, the album artwork may be on the iPod, because it is part of the song file. However, it is possible that iTunes also removes embedded album artwork from those song files, when syncing to an iPod that can't display album artwork (to save space on iPod).