Okay I know I am a retard, but what exactly does retarding the timing do?

 

Retarding the timing - whether by manually adjusting the distributor, relying on an MSD-BTM to do it for you, or by changing your ECU programming - causes the ignition to fire the spark plug later in the combustion cycle. This is desireable when the engine is operating at a high speed, temp, and/or pressure to keep the fuel-air mixture from detonating, as it likes to under those conditions.

Your stock ECU retards the timing a bit under WOT as compared to part throttle highway cruise. When you go forced induction, most engines like the timing retarded more when the boost starts building up.