Refers to indie bands or artists that are only obscure in that they have no Top 40 plays or chart hits, but are otherwise at least moderately well-known among music fans. The name comes from the fact that these bands are among the first that people discover when they are getting into indie music, as they are just scratching the surface. Surface indie bands often penetrate the mainstream consciousness from time to time, usually by appearing on TV show or movie soundtracks, or by signing to a major label. Examples include Sufjan Stevens, Belle and Sebastian, and The Decemberists. Smug hipsters will often deride surface indie bands by saying the quality of the music suffers as a result of their increasing popularity (and are especially prone to claiming those bands have sold out), but this is just pointless douchebaggery.
Don't listen to that hipster douchebag who says it gets so much better than Of Montreal. If you enjoy surface indie, then listen to it.