iTunes 7 Browse Album Covers functionality is really pretty cool you can even put it on full screen mode to browse you're albums. This is the same interface that has been made available on the iPhone and would look pretty cool on the iPod if its gets released for it.

If you have problems getting the Browse Albums functionality working make sure you have hardware acceleration turned on on your graphics card. Take a look at Mark Moshers blog on how to enable acceleration on your graphics card for iTunes 7.