Yisro #1: Hashem is greater than the other gods! Er... What other gods?

Yisro, upon being informed of the great things Hashem did for the Jews, says (Shemot 18:10-11):

י וַיֹּאמֶר, יִתְרוֹ, בָּרוּךְ ה, אֲשֶׁר הִצִּיל אֶתְכֶם מִיַּד מִצְרַיִם וּמִיַּד פַּרְעֹה: אֲשֶׁר הִצִּיל אֶת-הָעָם, מִתַּחַת יַד-מִצְרָיִם.	10 And Jethro said: 'Blessed be the LORD, who hath delivered you out of the hand of the Egyptians, and out of the hand of Pharaoh; who hath delivered the people from under the hand of the Egyptians.
יא עַתָּה יָדַעְתִּי, כִּי-גָדוֹל ה מִכָּל-הָאֱלֹהִים: כִּי בַדָּבָר, אֲשֶׁר זָדוּ עֲלֵיהֶם.	11 Now I know that the LORD is greater than all gods; yea, for that they dealt proudly against them.'

What does this mean - Hashem is greater than all gods? This might be taken to imply the existence of other gods!

There is in fact a dispute between two of the Targumim. Tg Yonatan translates the phrase in question straightly.
כדון חכימת ארום תקיף הוא ה על כל אלהיא
Though Tg Yonatan is typically more expansive and brings in more midrashim, for this phrase it does not. (It does, however, bring down the understanding of the remainder of the pasuk as referring to Hashem's greatness in punishing middah kineged middah.)

Tg Onkelos, in contrast, says כען ידענא ארי רב ה ולית אלה בר מיניה, which means "Now I know that Hashem is great/mighty, AND there is no god except for Him." This is not exactly the literal translation, but Onkelos, which adds extra words to avoid assigning anthropomorhism to God, could be expected to do the same here.

This is not to say that Onkelos is incorrect. In fact, one could read עַתָּה יָדַעְתִּי, כִּי-גָדוֹל ה מִכָּל-הָאֱלֹהִים ,כִּי בַדָּבָר, אֲשֶׁר זָדוּ עֲלֵיהֶם as follows: Now I know that Hashem is greater than all of the others purported to be gods, in that they (the Egyptians) tried to harm them [and Hashem prevented this from happening as mentioned in the previous pasuk].

In other words הָאֱלֹהִים refer to all who are regarded to be gods, and Hashem is greater because He actually has power.

Indeed, we see a close approximation to this in Tehillim 96:4-5: (and Divrei Hayamim 1 17:25)

ד כִּי גָדוֹל ה וּמְהֻלָּל מְאֹד; נוֹרָא הוּא, עַל-כָּל-אֱלֹהִים.	4 For great is the LORD, and highly to be praised; He is to be feared above all gods.
ה כִּי, כָּל-אֱלֹהֵי הָעַמִּים אֱלִילִים; וַה, שָׁמַיִם עָשָׂה.	5 For all the gods of the peoples are things of nought; but the LORD made the heavens.

Again, we see that Hashem is great (gadol) over all gods. Why? Because all other gods are things of naught - they have no power because they don't exist - they are idols. Hashem, meanwhile, has power, for He made the Heavens. All in all, Tg Onkelos' translation is very possible.

Tg Onkelos, though, takes an extra step of dividing the phrase in two. First: for Hashem is great. It is not a measure compared to anything else - not "greater than X." That is a translation of עַתָּה יָדַעְתִּי, כִּי-גָדוֹל ה. Second: "AND there is no god except for Him" which translates מִכָּל-הָאֱלֹהִים, as "He exists, of all the gods." It is a slightly midrashic type of parsing, which is not really necessary in this case.