Scary baby glitch is caused by
custom content clothes and accessories which are flagged inappropriately for babies. The game then assigns these clothes to babies because babies don't have any other clothes to wear and that makes them look like monsters.
Game modifications do not generally cause the scary baby glitch (unless you found some kind of mod that enabled base game clothes for babies. I have never seen such a mod). However, you might find a mod that enables an interaction for children (such as using the rock climbing wall, making nectar, or riding a horse), and in those cases, the child will temporary stretch to do the interaction and then return to normal form once the interaction is finished. When the child is stretched, the just look a little skinny, as they are all tall as an adult, but don't gain any weight.
Usually the custom content that cause the deformed babies is something that hitchhiked onto a sim or lot in sims3pack. In that case, it will require some extra effort to find and remove the custom content, as you will need to uninstall the item through the launcher. More info at Crinrict's SIms 3 Help Blog:
FAQ: My Sims look horrible.
