I think how much you explain depends on the age of the toddler and how much you plan on them experiencing of the birth. I have a friend whose baby is due Wednesday and her toddler will be 2 in april. Obviously, she hasn't explained as much to her as you would to a 3 year old, but since her DD will be at the birth center (probably in another room) when the baby is born, they have watched birth videos and explained that the baby comes out of mama's belly from between her legs. She'll kiss her belly and say "sister" and point to where sister will come out of mama, but that's about the extent of it.
Samuel will be 28 months when the new baby is born. I like the idea of using books to explain the birth b/c I too want him at the birth center when the baby is born (if not in the room). He won't "get it" that what's in the book is what will happen to mama and the new baby until he sees it happening, but I think knowing the story from the book would really help ease any fear he might have when he sees me in labor. Right now I'm just barely showing (20 weeks), but I have told him that he has a sister coming (gee, I hope I'm right about it being a girl
) and just the other day he pointed to my belly and said "sister." I know he doesn't know what that means, but we're working on explaining siblings to him (he has friends that have siblings) and I think when my friend has her baby, we'll explain to him that he's getting a baby sister just like Madaline got a baby sister.
The rule of thumb I've heard is that if your baby is under 2, you don't need to do a lot of preparation/explanation of the pregnancy, but over 2, you really need to try to explain it to them as much as possible. I'm also really glad that we're having a birth center birth and have the option of him being there for the birth because I think it will minimize sibling rivalry to see that this baby isn't just something I brought home from the store, but something that grew inside of me and that I gave birth to.