Babylon = False/corrupted religion = idol worship
In this particular case I think it refers to both, the corrupted Christian church, i.e. Roman Catholic and the city of Rome wherein she sits enthroned as a queen. When she says she is not a widow, it means that she is stating that God, her husband has not left her. The Catholic church DID start from, and has its roots in the early Christian church, but after Constantine it become corrupted. She divorced herself from God, not the other way around. She loved worldly pleasure more than she loved God.
So Babylon means a false and corrupted religion as well as the empire or dominion she has created in her own name.