iTunes has lots of independent stuff. People who are on CD-Baby, for instance, are able to publish their CD's on iTunes also, without too much hassle. Individual smaller labels can sign on and get the same deal that the big labels get.
My brother-in-law has his kids' music CD on iTunes. Unfortunately, he's no longer the only iTunes hit when you search for "Boogers", but it's still the only Children's Genre song.
One problem that iTunes does have, though, is that the rights are normally negotiated on a country-by-country basis for all but the biggest acts. So, if you like obscure music from Finland which isn't big in your country, then it will be on the Finnish iTunes store, but not the one that you have.