You can also decide if you overwrite any existing artwork or only existing artwork that is lower resolution.
Always replace value
Replace if better quality
Replace if empty
Usually there is no need to save the artwork to the file system as by default it is stored in the music files themselves but if you need to save artwork to the file system as well you can enable this option and decide if existing artwork can be overwritten or not, this can be useful for UPNP servers that may not understand embedded artwork for some formats (such as WAV), or to use artwork as the folder icon if using a UPnP Control Point to browse music by folder.
Save Artwork to File system looks at what is now stored in the song after the embedded metadata changes have been made. So if Save artwork embedded within in song file is set to Always Replace and Save Artwork to File system is set to Yes, overwrite existing files then both metadata and file system will have the same newly found artwork data. Whereas if Save Artwork embedded within song file is set to Replace if Empty and Save artwork to File system is set to Yes, overwrite existing files then if the file aready had embedded artwork this would not be modified and the file system will save whatever is currently embedded in the file.
So what you cannot do is find new artwork and only save it to the file system without saving as embedded data within the file itself.
If Save back cover art to file system is enabled this defines the name that should be used for the artwork files created, it does not include the file type part because the file will be created with the same format as is embedded in the file itself.