Hi astori17,
Business Schools don't really care if you retake the GMAT, so retesting is not a big deal. You can actually "sell yourself" by showing your dedication to the process and by showing improvement. Also, Business Schools know that not everyone is a great Test Taker, which is why the application process is 6 or 7 pieces (the 7th piece is the interview; some schools offer it, some don't).
For the Top-10 Schools, your score is probably outside the acceptable range, although you'd receive more specific information from an Admissions Consultant.
As to your questions, most Business Schools will take your Highest GMAT score (or your Most Recent GMAT Score, depending on the circumstances). It's unlikely that a school would average your scores, although it may have happened in the past in some rare circumstances. So it's not game over. I'd say that however you approached your studies (whichever materials you used) were NOT enough to help you earn the score that you wanted, so you have to try some new resources. The GMAT is a standardized Test, which means that it is beatable. You just haven't learned enough yet to properly beat it.
GMAT assassins aren't born, they're made,
Rich