This is an interesting snippet of an article regarding the word (from 3/2009)

While “retard” itself was never a medical term, it derives from the phrase “mental retardation,” which by around 1900 was commonly used by scientists and doctors, said Peter Berns, executive director of The Arc of the United States, a nonprofit advocate for those with intellectual and developmental disabilities.

Even though Berns said its pejorative connotation was established in the 1960s, the phrase “mental retardation” is still used in many state and federal laws, much to the dismay of those trying to stamp out its use.

“People with intellectual disabilities themselves really mounted a movement that they did not want to be referred to with the word ‘retarded,’” he said.

As such, the American Association of Mental Retardation changed its name in 2007 to the American Association on Intellectual and Developmental Disabilities after its members pleaded for the organization to do so. In another sign that the formal use of the term “mentally retarded” had lost currency, The Associated Press replaced it in its stylebook in 2008 with “mentally disabled.