As a immediate response to a melee or thrown weapon attack anyone who has not yet made a five foot step that round may, if such a step as allowed , may take the step as a retreat The grants +2 to AC that does combine with other bonuses. It does not provoke an attack of opportunity from his attacker.
This rule is meant to simulate the effectiveness of retreating in combat, something I have seen done many times in hand to hand fights. Its not going to be used every time as they person may want to take that five foot step forward or may not want to risk an AOO or being flanked by his other foes, falling off a cliff or some other bad outcome. Its a decent bonus but not enough to unbalance things and I am pretty sure it should be straight forward and easy to use.
However any feedback on it would be appreciated.