When I was young, not as long ago as some may think, my parents and other relatives used the term around me. The meaning was kissing, hugging, cuddling - just showing affection in general. It could have mean two adults showing affection to each other, perhaps leading to sex, or a parent and a child smooching in a normal non-sexual parent/child manner.

I doubt it would be in a popular song from 1916 if it meant something other than "spoonin'."