Originating from the Disney movie Bambi, where when Bambi was a young faun, he ignorantly called a butterfly a bird, said "burd."
It does not mean retarded, however, as it intentionally avoids being potentially offensive to people who are technically retarded.
Person 2: 2+2=4, you burd.
It has similar uses to "derp". (ie, to derp around, a Derp. Derby...)
Person B: Let's have a party and invide those burds.
Person A: Sure, what should we do at the party?
Person B: I dunno, let's all just burd around for a few hours.
Person A: Wow, that's soo burdy.