A take off of "hollywood", a non-derogatory term that refers to the movie-making machine that is India.
Any movie coming out of India may be described as coming from Baliwood, but Indian films seem to have a couple things in common - elaborate sets and costumes, and musical number.
Watch the Simpson's episode where Apu shows the Simpsons a film from India, and you'll get an idea of Baliwood.