The joke is a pun.  The word 'baited' was used instead for the phrase 'bated breath'.  'Bated breath' means in great suspense, very anxiously, or excitedly. 'Bait' or 'baited' are words that would refer to bait for fishing, such as live worms.
After Jimmy swallowed a live earthworm , he sat waiting with baited breath to see if he ' d get sick .