Babies and toddlers cannot die in the active household. But when they're living in an inactive household, they are at the mercy of story progression. When a town gets too full, story progression will "cull the herd" to help maintain your machine's performance. Sometimes it moves sims out of town (where they are gone from the game), and sometimes it kills them in bizarre accidents. Babies and toddlers are not exempt from this.
Somebody here had a screen shot of ghost babies laying on the ground in the graveyard, although I don't remember who that was.