I don't really think you should tell her anything. My parents never told me, and I'm not trying to say that that means nobody should ever tell their kids.
It's really hard to explain - can you see air? How do you know it's there? You don't. You "just know." I "just know" that Santa Claus lives. He lives in the minds and hearts of others who "just know." Easter Bunny, Tooth Fairy, et.al. fit into that category for me.
The Easter Bunny gave our kids toys (sidewalk chalk and bubble making toys, etc.) and hardly any candy because they don't eat candy (when we went trick-or-treating, they maybe had 3 pieces of candy, and played with the rest putting them into one pumpkin, then pouring them into another pumpkin, and then back into the first).
One year, we saw a toy in Radio Shack that looked like a computer. We thought it'd be a great gift for my nephew (at the time we had only 2 nephews, so we could afford a little more than we might normally spend). When they opened their presents, he about PASSED OUT and kept saying, "MOM.....MOM.....LOOOK!!!!!" We didn't know this, but he had specifically asked Santa for a computer, and my sister/BIL told him they didn't think Santa would be able to bring him one (I feel like Christopher Lloyd in "back to the future" - "they weren't thinking 4th dimensionally!") and lo-and-behold, he got his computer. Call me hokey, but you'll never convince me that Somebody didn't mysteriously plan that!! My nephew carried that around and played with it for at least a year or two, and even took it to "show and tell" in kindergarten several times.
For what it's worth....