A sweetheart, someone who you care about- the word is a cute, light way to address someone close to you. The friend, in order to be called "patootie" must be not only beautiful but above all have a very kind, open personality
"She is such a cutie patootie, invite her over!"
"Of course I love Dan, he's so cute and is my patootie fasho"
"Do you like Liza?" "Of course, she's a patootie-head"