The most commonly accepted definition of independent film, one that does not necessarily always apply, is that these movies tend to be less commercial than Hollywood blockbusters; also, they make a far more personal statement on behalf of the director or screenwriter, and are made on a significantly lower budget.
The significance of independent film has always been that it is as the forefront of revolution in the medium. What appears to be commonplace methods of making films--from raising money to casting actors--and what today is usually regarded as conventional filmmaking techniques--like flashbacks or shooting scenes in an improvisational manner and without a script--all began as experimental moviemaking by independent filmmakers.
The history of independent film goes back to the 1920s. Among the earliest examples are Melville Webber's expressionist version of Poe's "The Fall of the House of Usher" and Ralph Steiner's "H2O." Webber's film is a fine example of how independent film typically utilizes techniques not adopted by the mainstream for years or even decades. The movie features extensive slow-motion sequences as well as camera tricks and an inventive use of miniatures that would not become standard mainstream fare for over half a century.
Perhaps the single unifying theme that connects all independent film is that the makers are forced to work on a lower budget than Hollywood films. Not all independent films are very low-budget affairs with no second-tier talent, but even when an independent film features big name directors or actors, the film that is made still tends to have a budget less than half of what an expected blockbuster may work with.
The godfather of American independent film is director John Cassavetes. Cassavetes was a mainstream actor who began making a series of gritty, low-budget films in the 1960s, like "Faces," "Shadows" and "Husbands." Cassavetes set the template for independent filmmaking in these movies with handheld cameras, ensemble acting troupes that appeared in each of the films, improvisational acting style and using creativity to make up for a lack of money.
Since independent film budgets really begin to pale in comparison to mainstream Hollywood fare in the arena of advertising and marketing costs, most of these movies must achieve breakthrough status by performing well at film festivals. One of the most famous and well-attended independent film festivals in America is Robert Redford's Sundance Film Festival. Some people who felt that the Sundance festival was beginning to move too much toward the mainstream decided to launch the Slamdance Film Festival to focus on finding more undiscovered and unknown talent rather than relying on independent film made by recognizable personalities.
The most famous awards for independent film is known as the Independent Spirit Awards. These awards have been handed out since 1985 when Martin Scorsese's "After Hours" was the first winner of the Best Picture award. Some criticism has been leveled at the awards for honoring too many movies that are essentially mainstream films with a lower budget rather than honoring up-and-coming talent that managed to complete artistically satisfying films without all the benefits that come with working with brand-name talent.