Of course, what I mean by that is very similar to the meaning of "I'm having the most fabulous time" or "amazing time".
It is a synonym to fun, happy, joy, delighted, awesome.
When I see people swimming I think to myself "Oh that looks retarded" while a big smile and a glow come over my face.
To my girlfriend last week when she came to watch over me as I felt sick, I said "You make me feel so retarded with that wonderfully retarded smile of yours.." She kissed me. Then she said, "Is that a harmonica in your pocket or are you just retarded to see me?" ;)
My mom and dad sometimes would see me start dancing uncontrollably as a child and say "Now son... don't get too retarded! the other children look at you funny." "But why Dad? I'm just having SOOO much FUUUNNNNN! I feel like a TOTAL RETARD!!" :))) "Aw son, go on and be as retarded as you want".
Cheerleaders chanting "ARE YOU RETARDED? R- E- T- A- R- D- E- D, RETARDED! Be Retarded, be, be Retarded!"
