The card effect says "For the remainder of the battle, any opposing units that retreat or rout are instead eleiminated."

Does this refer only to units retreating through combat card effects or other special rules or also to the normal retreat performed by an active player who decides not to play combat card and instead retreats, ending the battle?

Rules say that battle ends only after one player's engaged units have retreated/routed (or eliminated), so for me BftBG would still be in effect if you choose to retreat instead of playing a card. Retreat, BftBG kicks in, kills them, battle ends.

Yes, that is in the rules on page 30, "End of Battle". The wording in the above paragraph "Retreats" however is slightly different. It says that "the active player can retreat, ending the battle, instead of playing combat cards". That sounds to me that retreating and end of the battle are in this case simultaneous. In any case, I have sent the question to FFG.

Ok, John Goodenough answered:

A: "Blood for the Blood God" affects any units retreating, including a normal retreat performed by an active player who decides not to play combat cards and instead retreats.