D.W.
My response is very much in line with Denise P's.
We have the same situation in our family where our 3.5 year old is beginning to ask questions. He has a developmentally disabled uncle, and will soon realize there's a difference between this uncle and his others.
We're an honesty is the best policy kind of family. We took that approach when I was diagnosed with cancer and have stuck with it. We'd probably explain it similarly to why he has light brown hair and his sister's is black - why some kids are really good at counting and others are good at reading.
But, I think all people agree (you probably had this situation in your family) that people with DD are gifts in our lives and teach us things we'd probably never learn under normal circumstances.
Good luck.