Lightning Server will scan the album cover in a certain sequence:
Firstly it will also scan current folders for picture files named by ‘folder.jpg’, ‘folder.png’, ‘cover.jpg’, ‘cover.png’ (case insensitive) and JPG or PNG files with a file name identical to the album title.
If no matching cover file can be found, Lightning Server will use audio file's embedded cover art (usually in low resolution) as alternative solution. If the audio file does not contain cover art, then the album will not have any cover shown up in Lightning DS.
Please also be noticed that Lightning DS, the control App will create album index first then download covers arts at background so the covers wont show up immediately after you have selected the music library. If you still can not see cover arts after a long time after the index has been created, try double tap ‘HOME’ button on your iPad, close the Lightning DS completely and restart again.