From what I have seen of the puppy mill industry some back yard breeders find out that they can make more and more "easy" money if they increase their breeding. They do make connections with pet stores and make some sales but they continue to sell to the general public as well. They are not picky. Whoever gives them the money they sell to. Of course things get out of hand due to their greed and they end up with a filthy mess.
It seems like the case for this recent puppy mill bust. It was a small house filled with tons of mostly Shih Tzu's. Some were covered in filth. Just awful.
The thing that really got to me about this one was the fact that the owners told the press that the dogs were not sick. I guess filthy meant nothing to them.