We always just answer what they ask. They start asking at an early age. We keep it breif and simple and if they still have questions they will ask some more - then you answer some more.
As a result my first two children know all about penis', vaginas, sperm, and sexually transmitted disease by the time they were 5. My 3rd is only 7 and knows a man fertlizes a womans egg and it grows inside the mommy- she has not asked any more.
We did discuss why its better to wait until you are married to have children - because they know some single mothers and its easy to point out how much more difficult it is to raise children when you have to do everything : work, clean, help with homework etc.
Unfortunately due to the media they are all way to aware of what it is to be gay.