I think it happens all the time, but people don't recognize it until they leave the area. Certain national songs or artists do better in some parts of the country than others. You can see it in sales charts, concert ticket sales, and file sharing. There are lots of tools to track this kind of thing, and most music people do it all the time.
There are lots of examples in country music. Pat Green and Jack Ingram were regional acts in Texas and Oklahoma. They got picked up by national labels and tour the country, but they're still bigger in Texas and Oklahoma than any place else. I've seen other recent examples in Pittsburgh, Seattle, Minneapolis, and Detroit. The problem is these folks only get airplay in their home town. Their career doesn't grow, and they're back to playing the local Applebees.
With regards to Twitter, MySpace, and Facebook, in order to be a hit, there needs to be some demand. Otherwise, it's just the amateur hour. Sure, anyone can put music on the web, but a hit is when it becomes viral and takes off. If you're just a cover band, doing other people's songs, that's not regional hits. But if you're creating original music and it gets picked up through all the media that exists, it's going to get noticed. It's not a hit until someone else says it's a hit.