If a batsman is injured or falls ill while batting, he may retire and resume his innings at the dismissal or retirement of another batsman. If he cannot return by the end of the innings, the batting side must close its innings after all other batsmen are dismissed (excluding the not-out batsman).
In the history of cricket there are only two times a batsman was out by this term retired-out. Both of them are Srilankan cricket players and both the instances were held in a same match.
Generally, retired-outs are happened only in warm-up matches where the result is not as much important. So this dismissal term was not included in the standard dismissal terms.
Retired not-outs are very common as you said, it may be due to any reason, since the batsman can re-enter at anytime