My parents were open and honest, giving me clinic terms and explaining the entire process at 5. It didn't have any negative affects and I lived a rather normal life with only minor sexual deviance.
My son is 4 and understands that men and women are quite different. I don't know how many times we've caught him masturbating. I'll sit down with him and repeat to him that it's okay but we only do it when we're alone in our bedrooms and if he wants to do it, he should shut the door for privacy. Kids love exploring their bodies, it's that process of wonderment- like hey, "Ooooh, look what happens when I do this!"
Recently, my son has started asking for babies. He loves babies, loves to look at them and his ears perk up when he hears them cry in public. We recently saw Up and he asked us, do babies come from clouds? Up until this point we weren't clear with him about the process of conception, so we actually decided to take a note from my hippie dad and conservative mother.
I told him that he has a penis and a woman has a vagina. That when moms and dads are in love, there is a process in which a man puts his penis into a woman's vagina and releases sperm which swims into a woman's egg and that egg becomes a baby. Much like a chicken's egg becomes a chick. He wants a chicken now- great... But he understood. We also made sure to tell him that he shouldn't talk to his friends about it, that sex is private and until he is old enough, he should only discuss it with us. We asked him afterward if he had any questions, all he said was "when I have a baby I'm going to name her megatron".. rather productive conversation for a 4 year old, if I should say.
Sex is what life is all about, without it, most of us wouldn't be here. I'd rather have him learn sooner or later what it is and that it is a natural part of life. There is no reason to lie to him or deceive him, however, I can only imagine the conversation his daycare teachers will have with me if he goes around talking about sperm or eggs. However, it's a conversation I'm willing to have because this is how we're raising our son and I can defend our family values till I'm blue in the face.
Several of my friends had the talks of how a stork brought them to their parents and surprisingly, none of them have ever been mothers plus they're incredibly well adjusted (only one has been to therapy but because of her parent's divorce) and all of them seem to have a good view of sexuality. It's all how a parent handles the sex talk and decides what age it is appropriate to be open and honest. Every parent has a different style and what works at the time won't work in the future, as our kids age we can adjust the story of how a baby is made and there is nothing wrong with that. We want our kids to stay kids as long as possible and however a parent handles a sex talk is however they handle it. No need to criticize their parenting skills.