Given that we're talking about terminal emulation, I'd be more surprised if "cooked" wasn't a reference to cooked mode

It's clearly in that sense that it's called "cooked". Which other meaning do you think applies?

The README of the project itself explains; "cooked" allocates the pty and interprets dynamically whether the other side is a command-line reader or full-screen program. See: https://github.com/vodik/cooked