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The Dunedin sound was a style of lo-fi indie pop that gained popularity in New Zealand in the early ’80’s. It grew out of the South Island’s punk scene from the ’70’s, which was heavily influenced by American punk bands such as The Stooges and The Velvet Underground (as opposed to the North Island punk scene, which was more notably influenced by the British punk scene). If you’re familiar w/ the Pixies or The Cure, you’ve got a general idea of their sound. All of these bands were signed to Flying Nun Records.
So. Here are a few of the Dunedin sound’s bands:

The Clean.
Arguably the most famous/important. I’m pretty sure everyone here owns all their albums.

The Bats.
I’d actually heard of them and the next guys when I was still in the States. They might be my favorite band from Flying Nun.

The Chills.
Originally featured a brother-sister line-up.

The Verlaines.
Took their name from the French poet, Paul Verlaine.

JPS Experience.
Originally the Jean-Paul Sartre Experience. They were forced to change their name after being sued by the Jean-Paul Sartre estate. Did a collaboration w/ Tom Waits, for anyone who’s a fan of the ole songster.

Able Tasmans.
These guys were actually from Auckland. They seem to be noteworthy in that they shared their musical sensibilities w/ the folks down in Dunedin and not the sea of foreign-influence popular up north.