My daughter knew at the age of 4, when a friend of mine was having a baby, that babies come out of a woman's vulva. When she asked a few days later *how* a baby fits through there I said " you know how when I use elastics to put your hair in a ponytail the elastic stretches, but then goes right back? Well..the vulva works the same way when it lets a baby out". To this day, 5 years later, I'm still very proud of my on the spot answer!
At around 6 y/o she asked me how the baby gets into the mom's belly and I told her it's a special kind of hug that moms and dads do and I'll explain it a bit more when she's a bit older. That totally satisfied her. Now that she's 9, the next time she asks me I'll go into the whole shebang. Or I'll sit down with her before she turns 10...whichever comes first. I want her to know it all before she starts to develop anywhere on her body.
Just give simple honest answers. They're not usually looking for an in depth answer.