How does Plex pick album art exactly?

Some of this depends on the setting in your library. There is an option in the library editor where you can select ‘Plex Music Only’ (online sources), ‘Local Files Only,’ or a mix of both. When the ‘Both…’ option is selected, the order of precedence is:

  1. Local artwork files (folder.jpg, etc.)
  2. Embedded tags and images
  3. Online sources

If no art is found at the first step, it moves to the next (local external files are prioritized over embedded images because embedded images tend to be lower resolution).

This How-To article has more complete information: