because he was over the age of 20. horses have a small chance to retire at age 21 and it increases each year until age 30, when it hits 100%. The oldest horse I've seen is 29 though.

oh, what does a retired horse do?

nothing, they're dead. "retired" is just the game's nice way of saying it

oh, I wish I knew this sooner!!!!!!!!  he was my best breeding stallion!!!

Most things can be found on the wiki. Its recommended to read it over when you are starting out