I think the ability to do this really develops for parents as their child grows up. What I mean is, I would have a hard time trying to explain a difficult concept with a hypothetical child. But I know my son's level of understanding (not very high right now, as he's 2), and I have a fairly good sense of what he really wants to know, out of the whole range of possible answers to questions like that.
The concepts of good and bad are actually fairly easy to explain. For my 2-year-old, I would be explaining it within the context of something ... I wouldn't just be explaining it out of the blue. So I might say: I don't like that you threw the book at me. That hurt me when you threw it, and it's bad to do something that hurts people. Or: Thank you for putting your toy away - it's very good and polite to clean up after yourself. The concrete concepts of good and bad are easy to get clear, and talking about good and bad consequences of actions seems to be pretty effective. My son, even at age 2, can really relate to experiential information like that, but doesn't understand explanations that don't relate to things he experiences.
I don't know how it will be to have to explain more ambiguous concepts, since my son is so young, but it seems that the longer I am a parent, the clearer this sort of thing seems to me.