Don't worry. I know it can be pretty jarring to hear that stuff coming out of the "mouths of babes" but it is actually pretty normal. My 8 yr old daughter has said some "grown up" things herself. So, my thoughts (as a mom and social worker), is to engage her in a casual conversation when playing, coloring etc.
Ask her if she knows what sex is and let her tell you what she thinks. It will probably be much less graphic than you think. Then you can explain what it really is, telling her as much or as little as you want. I have told my daughter it is something that grown ups do and that they should be married but that some people who aren't married do it too. I am careful not to make judgmental statements about those people though i.e. they are bad or they shouldn't do that. I do this for a couple reasons a) I don't want her to be judgmental as she will encounter all kinds of people in her life and I want her to learn that just because people have different beliefs it doesn't mean they are bad people and b) God forbid, she gets pregnant or has any kind of problems, I want her to know I will not judge her and she can talk to me about anything and I will still love her.
So, those are my thoughts. Take em or leave em. My belief is this, the best thing I can do for my chidren is to practice and teach them strong beliefs and values and then teach them that other people's beliefs and values may be different and that is okay. But, they can stand for what they believe in without pushing their beliefs on others. I want my children to respect themselves and do the right thing but because they believe in that for themselves as opposed to doing it because they will otherwise be seen as bad.