This is my opinion of the best recordings in 1996 for two categories and the best concerts, based on what I've heard and seen during the year. To me, what is "best" is what is the most weird, most self-indulgent, and most unique, all combined with good production. So if you or the artist you like makes music that is similar to what is prevalent on radio today, chances are you won't find those recordings on this list. This doesn't mean I don't like that stuff---it just means that it doesn't fit my definition of "best". The listing is in alphabetical order and is not ranked, and contains a link to a detailed review.
By underground, I mean anything that was sent to me that was entirely self-financed and self-released. Most of these bands are not on any label and have invested their own time, money, and effort into making these recordings. Not all recordings were made in 1996, but I guess you could say they were "released" in 1996.
Most of these acts are national acts and you can usually find their stuff in a record store near you.