Why is Babe Ruth called the Sultan of Swat?

It's because he was great at swatting the ball; home runs.

"Swat" is also a double meaning: "Swat" is also the name of an actual district in Pakistan (which would have been part of British India when Babe Ruth was active). At various times in its history, Swat's leaders were called Sultans. So, there were "real" Sultans of Swat in history, and doubtless a sportswriter with some sense of history and geography gave The Babe this enduring nickname.