Baited is the past tense of bait; bait means to prepare a trap with something to entice animals. It's a predatory action. To "wait with baited breath" can be understood literally. The cat ate the cheese, the scent of that cheese is still on the cat's breath which could bait the mouse. To "wait with baited breath" can also mean to wait in a nervous and excited state in anticipation of what's to happen. 
A cat ate some cheese and waited for a mouse with baited breath .