AAA to me are the publishers that are buying TV ads to promote their games regularly and operate with revenues into the billions with hundreds or thousands of employees. But this is a bit of a misnomer, as AAA can also mean the kind of design the game takes and its monetization model. This is an important distinction because AAA studios always design their games with particular monetization schemes or design their games in a particular way with lots of money behind their visuals. AAA studios can absorb multiple failures in either design or whole games without much loss. While it might seem pedantic to define AAA first, I feel like this is necessary to help focus down what isn't AAA.

Smaller studios, like Zachtronics, Daedalic Entertainment, or Coffee Stain have a respectable library and are medium sized companies that can afford the occasional flop in their production line up. They all started as indie studios which had produced their first game with very little. But they have clearly evolved passed the indie stage and now develop, design and build their games with their niche in mind but with the budget and operating maturity of companies that know what they are doing.

True indies, in my mind, have many or all of these characteristics:
1) tiny library or even a single game
2) small team funded independently or through small scale funding
3) very niche game design and approach to mechanics and play
4) Will fail entirely if any game they put out fails
5) Little to no business acumen
6) focused entirely on the game as an artistic expression of play rather than a business function.

To be indie doesn't mean you have all these things, or don't contradict some of them. Just this is a loose guide I think helps to identify differences.

For example, Stardew Valley is an excellent example of a game which is indie, but it is the most extreme form of "indie game", being made by literally one guy and financially supported by his wife. Minecraft was indie, but is now owned by a major publisher (Microsoft).

Zachtronics I used to consider indie, but they now regularly put out games and are financially quite secure. Their first games were Flash games that had little appeal and were quite artistically lacking. Their first commercial success, SpaceChem, was a huge breakthrough for the indie studio in establishing itself. Over the course of its future releases it would transform out of the indie space and into a comfortable sized gaming company.

SpaceChem is so obviously indie when you first play it that you can feel and see the history behind its development as a team that used to work with flash games. MOLEK-SYNTEZ, the latest game from Zachtronics (which followed EXAPUNKS) are clearly creations of a company that understands its market segment and knows how to execute on its brand and create games that fill that segment at a high quality of art, polish, and aesthetic.

AAA studios do something similar, but they don't have a "niche" or market segment outside of the most bland description: gamers that want shooters or cinematic RPGs.

Pummel Party, from the studio Rebuilt, also very much feels indie. It tried to apply a different formula to the "Mario Party" genre of games and make it more "take that" oriented in its design and presentation of absurdist mechanics. That kind of design philosophy worked well for Goat Simulator in a similar vein.

I think these distinctions are important because nearly all games organize themselves behind a publishing title of some kind, and delineating a game as "AAA" because it has a big name publisher or "indie" because it isn't well known doesn't allow us to analyze the market and the wide variety of game companies out there, or understand the kinds of games and how/why they were made.

I find taking this more nuanced approach to analyzing game development allows for a much more rich view of game development and its history and is a better indicator of the kinds of games that will be created, as well as the development path studios will take as they get past their initial successes and become established within the industry.

As an aside: maybe I didn't come up with a particularly good categorization scheme, as I hadn't thought about this as deeply and I had to look up example games/studios to ensure I had something more lucid over my hazy memories, but I hope my post helped to at least illuminate the kind of overall thinking and philosophy I applied in segmenting the game development space.