It is a miniature cake specifically made for the birthday girl/boy. Typically it's for first and second birthday parties, where the cake is "smashed" rather than really eaten. It coordinates with the main cake. I made a basketball out of the sports ball pan as a smash cake, and the main cake was a basketball court. This was for a 7 year old's party, as he wanted to smash his face in his cake, which happened to him(not volunteerily) the year before.
Well, at a small childs B-day (usually the first) you have a cake for the party and another little one to give the B-day child to tear into. It used to be just their own piece of cake to make a mess in, but now they get their own small decorated cake to themselves. Hence the term "smash cake" It gets more smashed than eaten, but it is fun to watch.
When I was a kid my mom took picture of us on our first birthday with teh entire cake. It looked in the picture like she gave us the whole cake. Of course she took it away cut a piece for the birthday child and then took a picture of them again once they had a huge mess all over. I really love making smash cakes so I am glad it evolved that way. 
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