I would not be freaked out just yet; however, I would be concerned. Normal developmental sexual exploration usually involves a small child from 3-5 years of age asking their parents questions.
Common questions for this age child follow: (Referring to the mother's breast)
What are them? How did you get them? Why don't I have them?
(Referring to the male penis from a female child)
What don't we have that? Is daddy's broke? (Because it doesn't look like theirs) etc.
The same questions could be reversed for the male child.
They may also ask their pregnant mother questions like: How did that baby get in your tummy?
From a behavior view the child that explores their sexuality may be found touching their private parts. The reason for this is because they do receive sensations from this that are pleasant. On the other hand they are not obsessed with it because if they had to choose between this and an ice cream cone, they would select the ice cream cone. It is merely something that they have learned is part of their body.
The reason that I said that I would b concerned with regard to what you saw your 7 year old doing is because children come into the world without any knowledge of sexual behavior. The questions the young child may ask occur when they notice that mommy has breasts or that daddy has a different private part.
To know to take off the underpants indicates to me that your daughter's friend may have seen her parent's (not intentionally perhaps) engaged in sexual behavior or that someone has touched her in this manner and she is educating your daughter. Not to frighten you but this could actually be reversed... Has your daughter ever had a sitter? Has she ever accidentally walked in on you and your husband?
Here is what I am going to suggest:
Sit down with your daughter and talk to her about her private parts (if you haven't already) and explain to her that she is not to let any one see them other than her mommy or her doctor when mommy or daddy take her to see him if she has a boo boo (or what ever you call it). You can ask her why she and her friend took their underpants off? Explain to her that if people other than mommy or the doctor want to look at or touch her privates it is because they are not nice and could hurt her. Be honest with your child and let her know that you are going to talk with her friend's mommy because you want to make sure that her mommy knows what happened because she might have to talk to her little girl about this too to make sure that she doesn't get hurt.
Do call the mother's child and let her know what happened. If she becomes angry at you for this do not let your little one associate with her child any longer. For if this mother becomes angry it indicates that she ignores things that take place around her because she doesn't know how to deal with them.
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