Its not Direct and Retail, its Direct and Regular plan.
A Direct plan is where you interact with the AMC of the fund directly and invest/buy MF units. In a Regular plan,you do it through an agent who helps you in buying these MF units for which he charges a commission.
The Direct Plan has a lower expense ratio as compared to existing plans in the same schemes since there is no commission to be paid to the distributor under this plan.It is obviously better to invest in direct plans for higher returns, but this also requires more hard work from the investor as he has to do the paperwork and choose a suitable fund.
Reference://www.valueresearchonline.com/story/22511