Peeps is slang for people - meaning your homies, friends, pals.
It was in a hip hop song a few years ago and took over suburbia at that point.
Apparently, suburbanites (especially wome and gay men) automatically envision marshmellow peeps when they hear it and it makes them giggle.
I do not think the slang started in this manner, but we made it our own, darnit!
I had a friend who actually bought stuffed peeps for all his friends at easter a few years ago.
When the great thread mama (UtahMama, Wiiinnndddddyyy to her "fiends") came up with the name, there were a bunch of us calling each other peeps - so she incorporated it into her weight loss thread (her and Twinkiemama are really urban, not white middle class moms).
I like to think of it as something more now.
We're cute and fluffy, darnit, but we're getting smaller!
(Just don't put us in a microwave!)
Here's my favorite peep picture (ignore the words. I had to show my support for a friend):