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I've always believed that an "indie" movie/book/record/whatever is one that is independently produced, promoted, and shown. If the indie eventually gets picked up by a big distributor later on, it's still an indie. However, if you have a case - like "Blair Witch" - where the makers of the film had a small film budget, but then used corporate connections to market & distribute the movie, then it's not indie.
IMHO, independent doesn't just mean "small budget" - Columbia and Universal probably put out tons of small budget releases and that doesn't make them "indie". Indie means independent - it means a movie made without help from entertainment conglomerates.
Hope that makes sense. :p
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