I have already chatted aboout some stuff with my dd who is also 3.
She has a younger brother so a certain amount of interest was sparked then.
Actually through her questions I have told her,
that babies are grown in a woman's womb
that it takes a daddy's seed and a mummy's egg to mix and make a baby
that babies need only milk from mummy (usually but not always )
that other animals grow in animals wombs
that plants grow from seeds
that chicks and crocodiles grow from eggs
that babies come out of women's vaginas when everyone's ready
and lots more I expect.
Thing is don't listen to me necessarily, people have such different views on this, you need to decide what you are comfortable with.
I would say be honest and accurate (though child-friendly language) if she asks. otherwise go with the flow.
There are many very good books I can list if you're interested.
TOUching - At this age I only said that her vulva, eyes, and bottom are hers and she gets to choose what happens to them (and then I roleplayed some useful ways out of awkward situations with friends etc) and that she must be careful because they can be hurt by poking.
hth