My daughter was 5 years old when she said that she wanted a baby brother; 7 when I and my husband started trying for baby number 2, and 8 when I finally got pregnant. My husband and I were already anticipating her questions when we stumbled upon the book What to Expect When Mommy's Having a Baby, which is every parent's best friend. The author, Heidi Murkoff is the co-author of the book What to Expect when you’re Expecting.

What to Expect When Mommy's Having a Baby answers questions from how babies are made to how babies get out of the womb. To make it more fun, the author created a character named Angus who gives out bits of information along the way. The book is recommended for children ages 3-5 but we still found the book useful even if our daughter was 8 when we bought it.
 
The first part of the of the book is the author's note to the parents - congratulating them on the new baby and acknowledging the fact that explaining the pregnancy to a toddler could be quite a challenge. The book not only answers common questions about the pregnancy; the topics in the book could also serve as a springboard for further discussions, although the author recommends that parents read the book first and decide which information is appropriate for their child/children.  
 
Each page addresses a question that children may have. The answers are straightforward and explained in simple terms, and includes activities for the kids in relation to the question. My daughter's favorite activity was rolling herself in a blanket which, according to the book, is how the baby feels like inside the uterus. She does it almost every time we finish reading it.