What is appropriate answer when a child asks about sexuality?

I have not (yet), but I think I would respond with "why do you ask?" and try to get to the root of the question. They may have seen something or heard a rumor of some sort. For the really young ones, I would probably let the parents know that they have some questions and go from there.

The closest I had come was two 4th grade girls who had questions about periods and a 3rd grader who had her 1st period at school and mom had not ever talked to her about it! Poor thing had no idea what was happening!