Sims can build Baking skill by reading a skill book, using the Cupcake Factory to "Bake Pastries", or by making any dish under the "Bake" option on a fridge or oven. As with the Cooking skill, Sims unlock more recipes the higher they build their Baking skill.
Unlike Cooking, Baking offers only one unlockable ability. At level 3 Sims gain the ability to decorate cookies, cakes and cupcakes to increase their quality. This costs §10 and improves the value of the dish by 50%. This option is only available on cakes made under the "Bake" options.
The authors of the Baking skill books are all references to The Muppets. Volumes 1 and 2 are written by Bill Barretta and Frank Oz, both of whom are (or were) Muppet performers, and Volume 3 is written by The Swedish Chef, who is one of the Muppets.