When is the right time to explain racism to a child?

This story is old hat, but the issue remains current. When your 7-year-old points out the label on your new couch, you know something is wrong.
"She's very curious and she started reading the labels," Moore explained. "She said, `Mommy, what is nig ... ger brown?' I went over and just couldn't believe my eyes."
The labeling on the chocolate-covered sofa set actually said nigger-brown as the color of the furniture.
"Unacceptable" in this day and age, Moore said.
Moore went on to tell her daughter about the word and it's origins, adding, "It was tough, because she really didn't understand," Moore said. "She'd never heard that word before and didn't really understand the concept of it."
This raises an interesting issue though, when do you explain racism to children? When they themselves become a victim of it, or do you take them aside and inform them/warn them when they are school-aged?