First we need to make sure you actually have some album art to work with.
There's several ways to go about this; you can import the covers automatically from the iTunes Store or you can painstakingly do it by hand for every album.
- By hand
I imported all mine into iTunes by hand, partly because I'm kinda picky and want them all the same size but mostly because I listen to weird electronic music that's just not available in the iTunes Store, forcing me to find the cover art from Discogs.com, Google image search and elsewhere.
Anyway, I will assume you have at least some album art in iTunes (the more the better) and move on.
So let's locate the images on your computer.
The problem, and the one thing that makes this instructable even worth sharing to begin with, is that the images are not readable by Photoshop as is and that they're all spread out into hundreds of strangely nested folders with strange names.
Therefore, we need to decode them and copy them all into one place.
The default folder for your artwork should be in "My Documents\My Music\iTunes\Album Artwork\Local"
If you can't find it there just do a search for the folder "album artwork" on your C: drive.
If you navigate around a bit from here you'll notice that it's very messy, so we have to find all the *.itc files (those are actually just renamed png images with some extra header data) that are thrown around in the myriad of folders and copy them into a new folder so that we can manipulate them without destroying your iTunes setup.
From the Local folder, click Search in your Explorer bar (CTRL-F) and search for any file that has "itc" in it's file name and after a while you should be presented with a list of all the cover art files.
Now, make a new folder somewhere else, maybe on your desktop, Select All the files (CTRL-A) and copy
them into your newly made folder.Make sure you copy the files, don't just move them or you will mess up your iTunes library!