I heard it enough in 3rd tier cities to really annoy me. Heard it in Hangzhou enough to annoy me as well (down around West Lake when the tourists are in town on weekends and holidays.
In Beijing, I hear it rarely, for which I am thankful.
One of the commentators in the comments is David Moser who defended it as non-offensive. He's a nice enough guy, but has spent much of his China career in Beijing and, I think, never had to live through the "laowai" cacophony of life in a second or third tier city.
Also, my personal experience, which I have noted a number of times to my Chinese friends, and which contradicts some of the comments in that article ... I have only ONCE heard a child call me "laowai." EVER. It's always "waiguoren". And it's happened so many times I have made a note of it...which has led me to conclude "laowai" is a learned/used term as they get older here.
Also, as a few people noted in the comments, their Chinese friends will slip, and use it, and then self-correct indicating they either realize it can have a slightly pejorative meaning, or they are aware that many laowai don't like being called laowai.