Wow you got one smart kid right there @thelearningman! Fair warning.. the questions get more difficult and more uncomfortable to answer as they get older.. haha. My daughter is 12 now and I'm happy that she still comes to her dad and me with sensitive questions instead of going to her friends or worse, the internet! We always try to answer them matter-of-factly and as honest as we can. While it's true that we can't control what kind of information they get from outside environment, we can definitely try and teach them the ideals we want them to uphold and leave it up to them to hopefully make the right and smart choices.
Thank you @jazzybells. In the age of the internet where children can get unfiltered information on the web, it is more important that we as parents develop that relationship with our children where they are comfortable to go to us first and ask these questions. I am happy that you have that kind of relationship with your kid.