The idea originates from Chappelle's Show. It is slang for a woman who has no butt.
The butt is entirely flat as a pancake.
White Pixie: "What ever happened to some good old fashioned Pancake butt?" "Now that's what mom used to make." "Nice and flat!" "No cupping necessary." "The line starts all the way at the bottom." "It's not even a line." "Just a tiny incision if you will."
A: "Yo check that girl's ass out!"
B: "I don't know what you're talking about! She has a pancake incision."