Another name for a hooker, where a younger woman accepts "gifts" and money in exchange for sexual favors and companionship. Typically the a man is considered the Sugar Daddy and buys the gifts and the sugar baby receives the gifts and provides sexual favors. The main difference between is the relationship is ongoing. It is just another type hooker john relationship.
Perfect example is the movie Pretty Woman, where Richard Gere is the Sugar Daddy and Julia Roberts is the Sugar Baby.