The artwork is displayed differently in iTunes in two different scenarios.
Program listing: (either finding the program in iTunes directory or on the itunes.apple.com web site) the artwork in your RSS feed is displayed.
Episode view: (either when finding a specific episode in iTunes Directory or when viewing an episode in iTunes app) the artwork stored in your media file is displayed.
Artwork in media files is saved in what are called tags. MP3 specifically calls these ID3 tags. Read more here: http://www.podcastfaq.com/creating-podcast/audio/id3-tags/
The page linked has tips how to write Id3 tags using iTunes.