I hope I don't get in trouble for posting this here.
First of all, I want to say that I never intended to explain circumcision to my son at this age. Unfortunately, he accidentally saw a clip of one being performed (it was part of a longer video that I was watching, with headphones on, while I thought he was asleep/napping) and when he asked me what they were doing, I started crying (I was emotional from the video and upset when I realized that he had seen it--and heard the baby crying, despite my headphones), so I had to explain it somehow. I told him that they were cutting part of the baby's penis--and, yes it hurt--but they did it because they thought it would make him cleaner and healthier. He asked "Why do they think that?" and at first I said I didn't know but I could see that he wasn't taking that for an answer so I tried to find a way to explain it.
I wrapped my hand around his index finger and said, "Pretend your finger is the penis and my hand is the skin covering it. Some people think that this skin will trap and hold in the germs." (He still doesn't have a good understanding of "germs" but he knows that poop is dirty, so I decided to use that to illustrate the germ concept.) I took the index finger from my other hand and said, "Pretend this is poop. Some people think that if you don't cut off the skin, the poop will get trapped in like this." I wedged my finger in between his finger and my hand and said, "See? It's stuck. But if I take my hand off here, it's not stuck anymore. See?" He just stared at me and I said, "But those people have it wrong because this is how the skin really works." I wrapped my hand around his finger again and poked it with my other finger, but didn't let it get through. He laughed and said, "Can I try?" and I said, "Sure." So then he poked at it and I said, "See? This skin is not letting you in!" He managed to get his finger in eventually and I trapped it and said, "This is what they think will happen if they don't cut the skin off." Then I let go of his hand and I explained to him that I had not let anyone cut his penis, but it did happen to some baby boys.
Later in the evening, he came running into the room and said, "Mommy can we play the penis game? You be the penis and I'll be the poop." I explained to DH what had happened and he said, "Great. I can't wait for him to break this game out in mixed company."
I tried to explain the situation again while simultaneously explaining that it wasn't a game. Fortunately, he hasn't asked to play it again... yet.