iTunes creates an Album Artwork folder inside your main iTunes library folder. Inside this are a number of artwork cache folders. Art can be embedded in the tags of most audio files, in which case iTunes will create a record in the cache folder. Alternatively if the tag doesn't contain artwork iTunes may attempt to match the track with one in the iTunes store and if found the artwork is placed in the download folder. If media with embedded art is removed and reimported or transferred to another library the art should always go with it. For store downloaded art there is chance that different attempts to fetch the artwork may or may not succeed. If iTunes fails to get album artwork then it may be that the album details don't quite agree with what is in the store in which case making them match might help. In practice it is generally easier to find the art on the net and paste it in yourself.
If the artwork cache isn't updating properly then it might pay to delete the Album Artwork folder which will force iTunes to rebuild it. Once you have done this you can scroll through the library in the album/grid mode and iTunes should repopulate the cache for each album as it goes. See Doug's Scripts - Embed Art for a script that embeds any store art before you start so that you won't lose any images that you already have. With luck iTunes will be able to fetch images for at least some of your albums that currently don't have art, after which you can manually search for and add images for those that remain empty. Manually added art is always embedded. Note that art can be associated with tracks in .wav format, but cannot be embedded as there is no tag.
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