The record is absolutely biased. Just to pick one important example, fossils form when buried by sediment, so we have more info about species that live in swamps and wetlands than on top of mountains.
[Taphonomy](https://en.m.wikipedia.org/wiki/Taphonomy) is the study of fosssil preservation, and one of its major goals is to clarify these preservation biases.
One way is to attempt to reconstruct an ecosystem. For example, if you find a large number of fossils of predatory dinosaurs in a certain area, you can assume the existence of an equally large number of prey dinosaurs, even if you only find a relatively small number of their fossils. All those velociraptors must have been eating something.
It's quite possible there were species that just didn't end up in the fossil record. But I don't think there would be many, because there would be other clues to their existence.