Truthfully if it was me, I would simply explain what it is really. It maybe harder for someone that young to understand the concept of guys liking guys or feminine guys, when they are probably still at the stage that girls/boys, depending on which gender they are, have cooties. But in this day and age kids are learning this stuff in school a lot sooner and if you want them to have more tolerance later in life, they are better off hearing the truth from you rather than what kids come up with now a days.
It is far better for you to explain to them the concept of gay and have them not completely understand, to which they will most likely come back to you when they have more questions, than allowing their peers to teach them about it as you have no guaranty that they will be tolerant and may end up teaching them the misconceptions rather than the facts.
And you don't really have to go that far into the explanation, with kids this young you should have heard of K.I.S.S right? Keep it simple stupid. Give them the most basic of explanations and they will probably be content until they are older and it's time to have 'the' talk. Anyways hope this helps you a bit, if not just ask and I'll be happy to help more.