I personally think that the use of the word retard or retarded is much more commonly used in Canada and the States rather than Britain. I find that people use the phrase "that's so retarded" with no regard as to what it really means and how insulting it is. I have 4 kids and they all know that the word retard is not tolerated at my house, as I have explained that it is insulting to their brother. One good thing though does seem to be used by older generations rather than young kids from what I hear.
Yes, we still hear a lot of it in the States, particularly in schools - which is why Special Olympics wants to try to get people to stop using the word. It's contributing to bullying in schools and helping ostracize children with intellectual disabilities in schools, who deserve every chance to learn and feel comfortable in school as everyone else.
The word is widespread here - I have many friends who toss it around regularly in an inappropriate context to mean "stupid" or "dumb". I correct them now. You never know who is listening.