British english vs american one
First, “klatch” is a borrowing from German meaning “gossip.” According to the Online Etymological Dictionary, it is related to an obsolete use in Middle English of “clap” to mean “talk noisily or chatter.” It has been adopted into American English (possibly from Yiddish) to be a slightly pejorative meaning of “social gathering, usually informal, of adult women.”
Second, the Urban Dictionary is a useful though neither an authoritative nor scholarly source on modern American slang. The sexual connotation is referenced only once even by Urban Dictionary and is attributed to someone with a predilection for sexually-flavored word play. I have never heard it
Urban Dictionary is very unreliable. Anyone can add an entry, and this may result in very unofficial or even mischievous 'definitions' appearing.
Some English speakers (probably over a certain age, or who are interested in Germany) will probably have come across the German noun Klatsch which is, roughly, 'gossip', although not necessarily with the malicious or spiteful nuance present in English. It appears in English very often in the German portmanteau Kaffeeklatsch (roughly, an informal coffee meeting). Less familiar to monoglot Anglophones will be e.g. Gesellschaftsklatsch (society gossip).
The word seems to have become adopted in American English after the middle of the 19th century, and is often seen without the 's' it has in the original German (as 'klatch'). There are German-themed restaurants and cafés in the UK and the USA called 'Klatsch'.
I daresay the word is a little old-fashioned, as there aren't that many bourgeois ladies with time on their hands these days:
As her son entered, Frau Metzerott lifted her brown, withered face, and fixed her dark eyes and steel-rimmed spectacles upon him.
“You have quitted early this evening,” she said, in the Platt-Deutsch dialect, which, with the High German of the book on her knee, was her only mode of speech, though she had lived in America for nearly forty years.
He nodded briefly, and then, as if by an afterthought, added, “It is the evening of the Kaffee Klatsch at the Hall, and I will go there for my supper. There is a little concert to-night, and dancing.”
Metzerott, Shoemaker (Katharine Pearson Woods, New York 1899)
Kaffee Klatsch. This furnishes very much the same class of entertainment that is to be found at an afternoon tea, save that coffee is the predominating beverage. The invitation is precisely the same as for teas, simply substituting the words “Kaffee Klatsch.”
Twentieth-century Culture and Deportment (Maud C Cooke, Philadelphia 1899)
The kaffee klatsch is an afternoon affair where ladies meet and chat as they sew and are served a luncheon of German dishes—cold meats, salads, coffee-cake, pickles, coffee, etc. Each guest is given a bit of needlework, button-holes to work, or a small doily to embroider and a prize is given for the best work.
Breakfasts and Teas: Novel Suggestions for Social Occasions (Paul Pierce, Chicago 1907)
A Klatsch of Kindie Rockers was an New York Times article by Jodi Rudoren in 2010 about a 'Kindiefest' (a 'family-oriented' music festival).
