This is slang for masturbating, the short way of saying it. Also the less embarrassing way of saying masturbating when speaking around adults and strangers.
A variant of the slang term "Omning it" popularised by the TV show invincible. Used in reference to when someone is masturbating and reaches such an intense point that they start heating up, hence them "baking" up. Usually followed by someone letting it crust in the intense heat, baking their semen.