'Indie' originally meant '(post-punk/new wave track/act) released on an independent label'. This was around 1979, by which time labels like Rough Trade, Mute, Cherry Red and Factory had started cropping up across Britain. The UK Indie Chart started up in January 1980 and reflected all this, with artists such as Spizz, Crass, Joy Division, Fad Gadget, Theatre Of Hate and Killing Joke regulars on the listings. (By the late eighties, however, the Indie Chart was awash with pop acts like Kylie, Rick Astley and Jason Donovan who were all part of the PWL stable - nonetheless, an independent outfit.)
The expression 'indie' had in any case pretty much lost its original meaning by the mid-eighties, when it seemed primarily to be used to describe jangly bands finding cult popularity in the wake of the Smiths: eg, the Wedding Present, June Brides, Soup Dragons, Shop Assistants and the aforementioned Housemartins (who of course went on to mainstream success). The application of the term to describe white, floppy-fringed, fey guitar types continued well into the nineties (Ride, Lush, early Suede, etc), but during the decade the music press was constantly creating further sub-genres (Shoegaze, Britpop, Dadrock, Lo-fi, Post-rock, etc, etc). In short, whether a band was on an independent label was neither here nor there anymore. (The expression was, by the millennium, diluted to encompass pretty much all alternative rock - particularly that that was chart-worthy: some even spread the net to include US acts like Pavement, Sebadoh, Buffalo Tom, Mazzy Star, etc.) Over the past few years, I think that the term has lost any real identity whatsoever.
IMO, the point of no return came when Spice Girl Mel C tried to re-invent herself - for the duration of one summer only - as an 'indie rock chick'. No disrespect to her (it was likely her management's decision anyway), but, at that point, it became pretty clear that 'indie' was by now just a musical coat-hanger upon which anybody could choose to drape their garb in order to try and appear cool or hip. Which - ironically - kind of killed the coolness.
Pulling habits out of a rat