I've just come across this unexpected behaviour while adding some artwork to my music in iTunes. The obvious way to do this is to drag a picture straight from your web browser onto iTunes' artwork pane. But it seems that this converts the picture into PNG format, i.e. if the original picture was a JPEG, then the result may be five or ten times larger! Both Safari and Camino do the conversion; I expect that it's a function of Mac OS X (QuickTime?) and will apply to other web browsers too.
I verified this issue on my machine by using the Save Artwork to Folder AppleScript -- it extracts the images from iTunes, and you can then see the true filetype and size in the Finder.
So, the alternative is to drag the picture from the web browser to a folder somewhere (e.g. on the desktop, or to a Finder window), and then drag that image onto iTunes. This preserves the original format, which can save a lot of space -- I expect to have room for over 50 more albums as a result.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20040727202248395