Why is it that people say they “slept like a baby” when babies wake up like every two hours?

Because when that baby DOES sleep, there is usually very little that wakes them up until they get hungry again.

I could vacuum under their cradle without them waking up. On New Year's Eve people were letting off LOUD fireworks in the street right outside our door and our 4 month old never noticed a thing. 

Sleeping like a baby is a reference to the fact that babies sleep peacefully with no worries about jobs. Money, and paying bills etc

they peed and pooped