If you have lyrics in the song's metadata, then they will show up superimposed over the album art when you are in the cover art view. At least that's what I remember happening with the one song I experimented with.
Lyrics are not loaded by default in iTunes (at least none of mine are). You have go into iTunes on the computer, right click on the song, choose Get Info, then paste the lyrics into the Lyrics tab. Then of course, you have to sync.
I believe there are some third party programs that will search your iTunes library and copy lyrics into it, but I've never played with any of them.