Starting with iTunes 7, album artwork goes into ~/Music/iTunes/Album Artwork (if you're using the default music library location).
Unfortunately, the files/folders aren't identifiable by browsing through them. The artwork itself is a JPEG I believe, but it's saved as an ITC file with some extra headers on it. There's probably a way to strip off the headers and get the JPEG out, but I haven't done that.
You might be able to figure out what artwork is where by taking a look at the iTunes XML file and seeing how it links ITC files to songs.