Heaven no criticism meant - I was just surprised she hadn't heard it discussed on the playground.
This is more or less what I said: grown up women have very tiny eggs inside them in their ovaries (showed them rough area) and every month an egg gets ready to make a baby.
To make a baby you need a little part of the Mummy(the egg) and a little part of the Daddy, which is called a sperm and looks like a tiny tadpole. Sperm live inside a man's testicals.
If a couple want to make a baby the man puts his penis into the woman's vagina and millions of tiny sperm rush out into the lady and start swimming towards the egg. This is called having sex and is only for grown ups. It feels nice for grown ups and they often do it to show they love each other.
The sperm have a huge race to be the first one to reach the egg and because they are so tiny it's a long way.
The winner reaches the egg (which although tiny is much much bigger than the sperm) and wiggles inside it and that is the start of the baby.
It grows and grows into a baby, kept safe in the lady's tummy making it get bigger all the time. The baby can hear inside the tummy too.
When it's time for the baby to be born the lady pushes the baby out of her vagina. This is hard work and can take a long time and is therefore called 'labour'.
After the baby is born the lady's tummy slowly shrinks back to where it was before.
Of course although an egg gets ready every month, not every lady wants to make a baby every month. In that case the egg comes out of the lady's vagina with some blood (which is just her body tidying up) and this is called a period.
Most girls start their periods when they are teenagers and it is part of becoming a grown up woman.
Obviously this is fairly simplified but my then five year olds followed it well and asked lots of follow up questions. We emphasised the "only grown ups" bit and a few different ways of course.