Wikipedia's page on Pig Latin has a number of scholarly references to Pig Latin, including articles in the journals Lingua, Journal of Child Language, and an address at the 2003 Linguistic Society of America Annual meeting.
It actually has nothing to do with the Latin language, but is an English word game and secret language used by children, and sometimes adults. A version of a word game in English appears in one of Shakespeare's plays, and there are many other invented languages used around the world. Some believe that playing with words in this way increases general understanding of a language.
The characteristic -ay sound at the end of the word immediately tells the person listening or reading that they are hearing Pig Latin. Those who practice can understand it as quickly as they understand English, while for others, even if they know the principles, it is nonsense.
It is easier to read and decipher than hear, until you are familiar with the sounds. When reading Pig Latin, all you do is move the consonant at the end of the -xay group back to the beginning of the word, and you can tell what the word means. It is not, however, quick reading. It is great for having secret conversations in front of people who don't know Pig Latin, or, even if they understand the idea, can not translate what the words mean before the speaker has already moved on two or three words further in the sentence. You can also write cryptic messages in it to friends who understand how to read it.
It is sometimes used by adults to try and give messages in front of their children, which they hope the children don't understand, but this tends to be a lost cause, as most of the time children are faster at understanding the verbal code than adults are. Curiously enough, my daughter, who knows Spanish, German and Java, has never bothered to learn Pig Latin, although she recognizes the meaning conveyed by ixnay.
Pig Latin's inventor is not recorded. It was mentioned in magazines during the 19th century. Reputedly, a young Thomas Jefferson 
wrote letters to friends in Pig Latin, which dates it to the late 18th century. (Thomas Jefferson on WIne, page 12, by John Hailman)
Some Pig Latin is recognized by almost every native English speaker, because it has become slang. Examples of this are amsacray (scram) and upidstay (stupid), azycray (crazy), umbday (dumb), and of course, ixnay.
