Funnily enough, it was introduced as a euphemism to "idiot" or "cretin", primarily in a medical context, because those other words were considered too unsavoury.

Now, I daresay "retard" is considered worse than "idiot".

One instance in which it's still used is for retarders, a form of brake often used on trucks and trains. Some forms, such as the jake brake, are very loud so you'll occasionally see towns put up signs that say "no jake brakes" or "no brake retarders" (because 'jake brake' is a generalized trademark.) As you might expect, these later signs can turn into a source of amusement...

I think the term "fire retardant" is also fairly common in some circumstances as well, though I'll admit to not being terribly familiar with brake retarders.