I agree with the comments you read on another site.
I actuality, children are already aware of their external sexual organs as early as six months; and by the time they are two, is it is said, they are already aware that their tush is more fun than their toes.
I did a research paper on this issue for the University of Southern Colorado on my undergraduate studies.
In my paper out outlined the sexual development of children from age six months to adolescence,and explored the basis of a recent proliferation of sexual activity in the class room with first and second graders, as reported in the news.
The main issue here is not that they do it; it is natural and normal. But at age 3 they do not know how to channel those feelings, and they do not know cognizantly how to handle these emotions. They suspect, that it should not be overt, and you see the behavior as a timid type behavior.
Until between age 6 and 9 (on average age 8) when concrete thinking kicks in, they are not likely to be able to understand exactly what is going on.
so for now you should be understanding and knowing that it is natural and nothing to be afraid of. It is not sign that your daughter is premature or going to be promiscuous.
When you ask her what you do, you are doing the right thing. IT is good that she is trusting and comfortable enough, even at this young age to tell you it "feels good". That shows a strong and loving bond between the two of you.
So not show alarm or disgust, simply accept it, and be observant. If she is doing it in an improper environment, then you may let her know gently that she should not be doing that in the presence of others. As she gets older, say about age 5 and she is off to school, you may want to have a discussion about what is proper behavior and conduct on the playground and in the class room.
10 years ago, this discussion would not have been a necessity; but in today's world, largely because of the internet and other social issues; the children are starting to act out sexually, even in the classroom, at younger ages. They need to know from early on when it is appropriate behavior and when it is not. Age three is a bit young for complete understanding of that, though they can understand no, not now, etc; but the way you do it at this age is different than the way you do it age 5.
But, trust me, there is nothing for you to be concerned with at this point, except monitoring the behavior.
You are very welcome, and best of luck to you and your daughter.