T.H.
If he's functioning at an almost 3 year old level, I think he can understand a little bit about the situation. I would just tell him. He's a toddler, so you'll have to keep telling him and the idea will be very foreign to him, but there's really nothing else you can do. There are some books out there to get, Berenstein Bears, etc. but my advice is to just tell him.
As far as picking him up, not sure about that. Hopefully you can still pick him up in your lap while sitting, etc. b/c just going cold turkey may stress him out, I know it would my kid! ;)
Congrats on the new edition!