My eight-year-old asked me this at bedtime. I fobbed her off by saying it was far too late to talk about that now. But I expect she'll ask again. Would you tell her, or say she's too young and we'll talk about it when she's older?
DD was conceived by IVF and knows a bit about that. I don't think she knows exactly what sex is, although I think she's guessed something vaguely close to the truth.