I am unable to locate the exact origin of this term. Dammit.

The American Heritage Dictionary of the English Language
Slang. A wealthy, usually older man who gives expensive gifts to a young person in return for sexual favors or companionship.

..and with a slightly different flavour..

Dictionary of American Slang
A male sweetheart well provided with money, especially, a wealthy, usually elderly man who spends money freely on girls; specifically, a worldly, sophisticated man, usually not young and usually wealthy, who pays the rent and other expenses of a young woman in return for her sexual favors and companionship.

..now for an expansion of the definition..

Merriam-Webster's Collegiate Dictionary
Function: noun
Date: 1926
1 : a well-to-do usually older man who supports or spends lavishly on a mistress or girlfriend
2 : a generous benefactor of a cause

Wordnet believes Sugar Daddy is a type of 'person loved by another person' - a sweetheart, sweetie, steady, truelove - but for me none of these terms captures the transactional nature of sugar daddyness.

Contemporary usage includes any financially/resource superior entity that supports another less endowed entity:
example -A successful organization may act as sugar daddy for another smaller (possibly financially troubled) organization as typified by a recent lurid headline in the Fortune Small Business magazine:

A Sugar Daddy for Hungry Startups

Old Uncle Sam may be the financier you've been searching for.

Related Terms - candyman, meal ticket, and the obvious lovematch for the Sugar Daddy; the Gold-digger.