Oh, this is what im already dreading!!!
If your children are already nattering to each other there's probably some playground conversation going on, so it's probably worth the talk, so they do have the facts right, as the previous posts have mentioned.
Also that way you can explain it's a 'sensitive' issue and not something to talk about at school (from what i have heard a lot of primary schools are uncomfortable with the kids talking about it in the playground) and also let them know that it's best not to talk about it with mason (or younger cousins that sort of thing).
I guess i probably don't really have much to go by in the parental side of things, but i think i got the beginnings of the talk when i was about seven, i used to pinch mum's tampons and let them expand in the bath so she explained what they were for and i asked a lot of questions so it sort of went from there. I guess it has a lot to do with how mature you feel they are as well...