Here I have found information online about the history of album art, and summarised the information. I have also highlighted points, and intend on writing a conclusion afterwards.
The cover became an important part of the culture of music when it first became used. Under the influence of designers like Bob Cato who at various stages in his long music career was vice president of creative services at both Columbia Records and United Artists, album covers became renowned for being a marketing tool and an expression of artistic intent. Notable examples are The Beatles' Sgt. Pepper's Lonely Hearts Club Band which had cut-out inserts, lyrics, a gatefold sleeve even though it was a single album, The Rolling Stones' Exile on Main Street which had a gatefold and a series of 12 perforated postcards as inserts, and Pink Floyd's The Dark Side of the Moon which had a gatefold, lyrics, no title on the sleeve and poster and sticker inserts. The move to the small (less than 1/4 the size of a record) CD format lost that impact, though attempts have been made to create a more desirable packaging for the CD format, for example the re-issue of Sgt. Pepper, which had a cardboard box and booklet, or the use of oversized packaging.
The importance of cover design was such that some designers specialised or gained fame through their work, notably the design team Hipgnosis.
The talents of many photographers and illustrators from both inside and outside of the music industry have been used to produce a vast array of memorable LP/CD covers. Photographer Mick Rock produced some of the most iconographic album covers of the 1970s, including Queen's Queen II (recreated for their classic music video Bohemian Rhapsody). From 1972 to 1975, photographer Norman Seeff was Creative Director at United Artists and in addition to his many cover photographs, he art directed dozens of album covers including Exile on Main Street, many of which received Grammy nominations.
In addition to the examples mentioned previously, a number of world-renowned graphic artists and illustrators such as Ed Repka (Megadeth), Andy Warhol (The Velvet Underground, The Rolling Stones), Mati Klarwein (Santana, Miles Davis), H. R. Giger (Emerson, Lake & Palmer, Debbie Harry), Frank Frazetta (Molly Hatchet), Derek Riggs (Iron Maiden), Jamie Reid (The Sex Pistols), Howard Finster (R.E.M., Talking Heads), Al Hirschfeld (Aerosmith), Gottfried Helnwein (Marilyn Manson), Rex Ray (David Bowie), Robert Crumb (Big Brother & the Holding Company), John Van Hamersveld (The Rolling Stones), and Shepard Fairey (Johnny Cash) have all applied their talents to memorable music packages.
A number of artists and bands feature members who are, in their own right, accomplished illustrators, designers and photographers and whose talents are exhibited in the artwork they produced for their own recordings. Examples include Jimmy Page (Led Zeppelin IV), Marilyn Manson (Lest We Forget…), Freddie Mercury (Queen I), Mike Shinoda (various Linkin Park albums), and M.I.A. (credited variously on Elastica's The Menace, her records).
Personal Conclusion
Previously, it seems graphic design / illustration has a huge importance in the music industry. This is probably made obvious by the considerable amount of iconic artwork produced, none of which seems to be recent. Examples could include Pink Floyd's 'Dark Side of the Moon' & The Sex Pistol's 'God Save The Queen', which stirred as much controversy as their music. The only recent example I could consider as iconic would be The XX's logo.
I think the obvious behind this is the change of format of music. A 12' Vinyl provided a perfect canvas for an artist or designers work, and would also be an excellent way a designer could promote themselves. Less information could be shown on a CD cover, and even less as MP3, which originally did not hold any artwork information.
However, times are changing. Vinyl's are now having a comeback, with sales increasing in the passed few years. This is due to music enthusiasts seeing the purchase as a 'thank you' to the band, something which cannot be achieved through illegal downloads. Itunes and Spotify, two of the world's most used music playing softwares, give emphasis on the use of album artwork (see below).
Here is a screenshot of my iTunes library. As you can see, it is easy to view your album artwork, something which people like to have whilst songs are played.
The future of album artwork is not clear. Although the comeback of vinyls seems to be slow and steady, it could collapse, comepletely depending on technology. One thing that is known is that music is becoming more and more popular, with accessibility to new music and genres being made much easier by the internet. There are more festivals than ever each year, meaning much more possible scope for graphic design used for hospitality for both the bands and the festivals themselves.

