When do children understand consequences?

It's not an all-or-nothing thing; understanding develops gradually. A 2yo does not understand consequences as well as a 20yo, but he does have some understanding, and it's increasing all the time. My 15mo certainly has some understanding of consequences: If he keeps throwing his food on the floor instead of eating it, we will stop giving him food (for now!). If he tears a book, we will take it away. If he pulls on my shirt, I will get ready to nurse. If he wakes up and I'm not there and he calls for me, I will appear. And dozens of other situations in which he understands that doing X makes Y likely to happen.

So, I think it's not accurate to say that your friend's son "doesn't understand consequences"--I'm sure he does. Would he understand that the reason they're leaving is because he hit? Probably not, if it isn't explained to him, and maybe not even if it is...but if that is consistently the result when he hits another child, after a while he will understand.

You didn't mention if your friend did anything else about the hitting or if leaving was her only idea. I'd start with, "We don't hit people!" in a shocked voice, moving him away from your child, and if the hitting was motivated by a conflict (as opposed to his wondering how it would feel to smash his hand into her face ) trying to resolve the conflict peacefully. I wouldn't leave your house unless he was hitting repeatedly. In that case I would say, "I see that you're not ready to play nicely today. DD doesn't like to play with people who hit her. We'll have to go home now." A 2yo might have the verbal skills to understand that; if not, as I said, consistency eventually will get it across.