Lamb Sauce is a post-Skeletron throwing weapon dropped by the Undead Chef miniboss.
When thrown it will travel in an arc. when hitting a tile or enemy it will explode into a flame pillar and 3-4 embers inflicting On Fire!
The item and it's tooltip is a reference to Gorden Ramsey. In a episode of Hell's Kitchen, Ramsey is trying to find the location of the lamb sauce.