Whenever I use the word "retarded" I never really think about it. I usually use it to describe someone who is being really foolish, or silly. When I checked the meaning out I realised the word denotes something much stronger than how I use it.

(Dictionary.com)

re·tard

   [ri-tahrd, for 1–3, 5; ree-tahrd for 4]  Show IPA
–verb (used with object)
1.
to make slow; delay the development or progress of (an action, process, etc.); hinder or impede.
–verb (used without object)
2.
to be delayed.
–noun
3.
a slowing down, diminution, or hindrance, as in a machine.
4.
Slang: Disparaging.
a.
a mentally retarded person.
b.
a person who is stupid, obtuse, or ineffective in some way: a hopeless social retard.
5.
Automotive, Machinery. an adjustment made in the setting of the distributor of an internal-combustion engine so that the spark for ignition in each cylinder is generated later in the cycle.



re·tard·ed

   [ri-tahr-did]  Show IPA
–adjective
1.
characterized by retardation: a retarded child.
–noun
2.
(used with a plural verb) mentally retarded persons collectively (usually prec. by the): new schools for the retarded.


 I think this is one example in which the meaning of a word is diluted over time and it has now come to be used in more casual and less serious situations where what is being referred to as being "retarded" is not necessarily a person but could be the situation itself. Say for example a person could trip over something and someone else would say "You're so retarded, can you please walk with your eyes open?". Or if a test date gets pushed to an earlier date, a student would say, "Oh man, that is just so retarded." So in this case the meaning of the word has been diluted and is less derogatory when it is used nowadays perhaps?