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The sugar skull design is part of the Day of the Dead celebrations.

Day of the Dead is an interesting holiday celebrated in central and southern Mexico during the chilly days of November 1 & 2.
Day of the Dead is a very expensive holiday for these self-sufficient, rural based, indigenous families.
Even though this coincides with the Catholic holiday called All Soul's & All Saint’s Day, the indigenous people have combined this with their own ancient beliefs of honoring their deceased loved ones.
They are decorated with candles, buckets of flowers (wild marigolds called cempasuchil & bright red cock's combs) mounds of fruit, peanuts, plates of turkey mole, stacks of tortillas and big Day-of-the-Dead breads called pan de muerto.
They believe that the gates of heaven are opened at midnight on October 31, and the spirits of all deceased children (angelitos) are allowed to reunite with their families for 24 hours.
They believe that happy spirits will provide protection, good luck and wisdom to their families.

A calavera [plural:calaveras] (Spanish -pronounced: [kalaˈβeɾa] for "skull") is a representation of a human skull. The term is most often applied to decorative or edible skulls made from either sugar or clay which are used in the Mexican celebration of the Day of the Dead (El Dia de Los Muertos) and the Roman Catholic holiday All Souls and saints Day. Calavera can also refer to any artistic representations of skulls, such as the lithographs of José Guadalupe Posada. The most widely known calaveras are created with cane sugar and are decorated with items such as colored foil, icing, beads, and feathers.