Biting Your Baby 

An affirmative statement or acknowledgement of information.
A jovial retort.

Roots, if they must be traced, are archaic and are in reference to one's "baby maker" (that you are putting your mouth near it/on it).
One is so much in agreement with the other person that they would preform oral sex with each other.

Not a threat, although new mothers don't favor this term. Use discretion with your slang.
The negative form is also easy to use:

"I am NOT biting your baby".

Other forms exist such as:
"I'm gnawing your toddler"
"Chomping your child."

Used usually to add variety by those that are already familiar with "biting your baby".

Drew: I'm having a barbecue on Saturday.
Tyson: What are you grilling?
Drew: Steak and corn on the cob.
Tyson: I'm biting your baby! I'll be there.

Drew: Tonight Ingrid and I are going out to the movies, do you want to come?
Ian: I'm biting your baby, but I've got to work on this script. Thanks, though.

Jayson: Do you want to hang out at my house?
Drew: So I can watch you play Wii? I am not biting your baby.

Biting Your Baby by AGS July 11, 2007