Never used in a negative way, and commonly used by groups of women surrounding a new mom.
The smell sticks with you after holding a new baby, and makes you want a baby of your own. (Which is why men don't use the term too often.)
Kara: *gush* Ohhh, she has that new baby smell.
Maria: It makes you just want to eat her up, right?
Kara: Ahh, I want a baby so I can smell like this all the time...
Henry: I'm just gonna get out of here..... *vanishes*
Maria: You boyfriend must not like kids, Kara.