The explanation of this expression is a bit embarrassing, because I completely misunderstood it as a youngster.  I thought it was “baited breath,” and that it must have something to with the rank bait my Dad used for catfish. Of course, it turns out that the word is “bated,” and according to Dictionary.com, it means, “…with bated breath, with breath drawn in or held because of anticipation or suspense.” The example given is, “We watched with bated breath as the runners approached the finish.”  For people who have seen the movie, Secretariat, you can imagine the people at the track collectively holding their breath until they saw which horse won a close race.  From Straighdope.com, bated breath has been around since Shakespeare’s Merchant of Venice, “With bated breath, and whispring humblenesse.”