The industry term for what you're asking about is "source music," which applies to any music supposedly originating from a logical source within the scene (whether it's an onscreen street musician, a band visible in the background, or a television set or radio). And although the "uptempo instrumental jazz" from 1960s films is what you cite, the practice of inserting generic-sounding popular music "heard" by characters from a visible radio practically goes back to the start of the sound era. Even in the early '30s it was common to see a character turn on a radio for source music during a rear-projection driving sequence.
On some occasions it might have seemed cheaper to license some existing song or instrumental music to excerpt as needed; but that practice had hidden drawbacks.
From the 1920s into the '60s, most of the Hollywood studios maintained vast armies of employees across many departments of specialty. Each studio's Music Department typically had a music director overseeing multiple composers, arranger/orchestrators, copyists, and even an orchestra on staff drawing a weekly salary -- so some staffer often might be assigned to just scribble out a couple of minutes of some innocuous tune, which would then get arranged for a suitable combo, and be performed by some staff players to be heard as source music somewhere in a picture. OR: the music director might bypass a composer and just order an appropriate arrangement of some existing song or piece of music which the studio already owned through its music-publishing division. Two examples of this, off the top of my head, are heard in MGM's NORTH BY NORTHWEST (1959): 1) immediately before jaded advertising man Cary Grant's abduction at gunpoint, he breezes through the lobby of a New York City hotel as from offscreen we hear hotel musicians play an instrumental rendition of the song "It's a Most Unusual Day" (written for the 1948 MGM picture A DATE WITH JUDY); 2) later in NORTH BY NORTHWEST, as Grant fools Eva Marie Saint into believing he's taking a shower while he actually is spying on her through the barely closed door, he's robustly whistling "Singin' in the Rain" -- which written for a 1929 MGM movie.
For many years, the studios' preferences for using original music and recycling tunes/songs they already owned was cheaper than licensing existing songs which the public would recognize. In two decisive lawsuits from early years of the homevideo era, songwriters Paul Simon and Peggy Lee, respectively, successfully sued producers over claims that their original licensing agreements for songs to be heard in THE GRADUATE (Simon) and LADY AND THE TRAMP (Lee) covered theatrical and broadcasting use, but not home video (which hadn't existed when those films were produced). Those court cases led to countless films seeing their eventual homevideo release with packaging that contains such language as "Some music has been changed in this homevideo edition." Those are the instances in which studios clearly preferred to drop unimportant pieces of music, rather than shelling out any updated "re-licensing fees" to creators of pieces heard in those films originally.
That's why today, quite a number of older pictures that once featured "real" (or "recognizable") popular songs as source music -- possibly including some of those same 1960s movies you've seen -- have generic-sounding source music in certain spots on DVDs, Blu-rays, and/or cable. Now you can better understand how some of that "nothing special" music ended up heard from the radio in films from bygone eras.
Most great films deserve a more appreciative audience than they get.
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