From Sarah Hrdy (email):
A “fairy smile” is a reflexive smile that spontaneously and briefly flickers across the face of a newborn baby. Some years ago, Tetsoro Matsuzawa discovered that these occur even before birth, en utero in chimpanzees! (Long story, but Tetsoro was using laser probe with a camera on a highly habituated pregnant chimpanzee female, accustomed to working with him to learn this). So of course do humans en utero. After birth, one may see a reflexive “smile” flicker across the face of a baby even while sleeping —no outside stimulus or engagement with another person needed, tho may occur in response to a sound. "Fairy smiles" are different from “social smiles” that emerge later, and occur in response to someone else speaking to or smiling at them, etc.
I grew up in the southern part of the U.S. and people around me used the term, but now that you ask, am curious to know where this term to describe “reflexive, non-social smiles” in newborn babies comes from.