For children who are just too young to understand the basics, I'd just say that the daddy plants a special seed in the mummy's tummy that grows into a baby. If they sask how they plant the seed, I'd tell them it is when they have a very special cuddle.

For older children, you might add the detail that sometimes during special cuddles, daddies put their penis in the mummy's vagina, and that is how they plant the seed.

Molly (who is 3) already knows that baby's come out of the mummy's fanny, and it hurts a bit, but then its better. And yes, she has an imaginary baby brother that seems to crawl into and out of the womb, depending on what mood she is in...