The term refers to the very round, uniform faces that are the easiest to create with the CAS face creation tools. The reference is to old-fashioned puddings that were boiled in a bag and came out soft and nearly spherical, like this: http://happyhomemaker88.files.wordp...-006-custom.jpg
A lot of people want it to be easier to make sims 3 faces that are more angular and more detailed. It's possible to do, especially if you use a hack to extend the range of the facial sliders.
Edit: heh, while googling for that image I came across this quote: "'The Head of Man is like a Pudding; and whence have all Rhymes, Poems, Plots, and Inventions sprung - but from that same Pudding? What is Poetry but a Pudding of Words?" = Henry Carey, 1726
So apparently the whole pudding-head idea has a long history