The Cars' 'Just What I Needed' picture disc is the best picture disc I've come across so far. (There's an added bonus of having my name subtlety written in the might have to squint!)

Just as coloured vinyl was introduced to help buyers differentiate between genres, picture discs were introduced to help boost sales.

Picture discs first appeared in the 1930s, when various materials were experimented with to encourage people to buy more records. Early picture discs had a very poor quality to them as film was placed over a thick paper print and then pressed with the grooves. (Hitler even released a 7" picture disc of this type with one of his speeches on.)

I have recently discovered Hard Format. It's definitely worth viewing if you have a love for music-related design. There are some great Peter Saville art works which I recommend looking at.
Also featured: The Cabaret Voltaire's 'Micro-Phonies' album art work. Here's a link to their song 'Sensoria' on youtube.