Babies are generally born with a large head in proportion to their body and tend to grow out of it by the time they reach toddler stage. Stewie is still listed as 'one' year old and hasn't yet reached that stage. Stewie has been depicted with his football-shapped head at birth on st least three occasions but was shown once having a normal head until an accident in 'Stuck Together, Torn Apart'.
Stewie himself references the size of his head in an episode in which Lois hands him a plastic bag in a supermarket. Out of spite, he tries to spip it over his head and asphyxiate just to show Lois what a poor mother she is, but his head won't fit, prompting a remark along the lines of "either I was a c-section or you're superwoman".