All books have two covers: one that is embedded in the book and one that is uploaded separately.
The book cover you upload separately is the one the stores use to display your book in the store in good quality.
The embedded book cover is the one that is 'inside' your book, in the epub file: if someone buys the book, that book cover comes with it and will be displayed on the virtual book shelf of the reader. The image you are using here cannot be larger than 4 million pixels (so a 1600×2400 size works just fine).
Embed ebook cover using Sigil or Calibre
Click the big blue + (Add Existing Files) and select the image from your computer. It will automatically go in the 'Images' folder on the left. Right click the file and set is as cover image.
If you are using Calibre, you just have to right click your book, Edit metadata and select the image.
Check the code
If you have added the cover and it is not recognised, it is possible that your cover is not marked properly. Filenames containing non-standard characters like spaces or colons could lead to errors in embedding the cover.
Please make sure that the content.opf file of your book contains the following line:
<metadata xmlns:opf="http://www.idpf.org/2007/opf" xmlns:dc="http://purl.org/dc/elements/1.1/">
<meta content="0.9.8" name="Sigil version" />
<dc:identifier id="BookId" opf:scheme="UUID"></dc:identifier>
<meta content="cover.jpg" name="cover" />
Please replace 'cover.jpg' with the name of your own cover file.