In the music industry, not much has changed over the years in terms of the business of producing, marketing, and distributing music. The industry is still dominated by major record labels that sign the biggest stars, but there are also incredible varieties within labels, focusing on genres or specific markets, for example.
A musician that does not have a contract with a record label is referred to as an unsigned artist. Quite simply, you have not signed with a label.
There are a number of reasons that a musician may not have a contract with a record label. They could be starting out and still hoping to catch the eye of a label scout, or they could intentionally choose not to sign with a traditional label, opting instead to release music in one of the new media formats that are now available.
Having a contact with a record label will have a lot of conditions and requirements that the artist must adhere to in order to receive any finds referred to. Some musicians may feel that this restricts their ability to make art, and so may choose to forgo the commercial path in favor of staying true to their art.
Of course, signing with a record label is also often the quickest way for a new musician to reach commercial success in the business, as they have entire departments dedicated to supporting development and handling all major marketing efforts.
Musicians often have to decide what their goal is when choosing whether or not to sign with a record label, and some decide to try their hands at it alone before finally entering into a contract with a label. There are more and more options everyday for musicians to find success in this way.