Bakery provides a "single sign on" feature for Drupal based sites that are on the same second-level domain (i.e. example.com, subsite.example.com, subsite2.example.com). It could also provide support for any other website that implements the same web cookie, xmlrpc, and POST methods.
Read the Bakery documentation for more information.
Note, Bakery 1.x is incompatible with Bakery 2.x. Run the same releases (including same daily development tarball) on all domains you wish to provide SSO for.
The original design and code are by David Strauss. The module is currently maintained and developed by some members of the Drupal.org infrastructure team and some people who use it on their sites or their customer's sites.
Significant work for Bakery has been sponsored by Examiner.com who funded much of the Drupal 7 port and features related to sharing data between sites. Growing Venture Solutions also supported work to improve the feature-set of security.drupal.org. Acquia provides on-going support.