Many/most of us have been asked this question by a child at one point in our lives. Here is the real answer, that you probably will never tell them.

A clear, cloudless, daytime sky is blue because molecules in the air scatter blue light from the sun more than they scatter red light. When we look towards the sun at sunset, we see red and orange colors because the blue light has been scattered out and away from the line of sight.

The white light from the sun is a mixture of all colors of the rainbow. The colors of light are distinguished by their different wavelengths. The visible part of the spectrum ranges from red light, with a wavelength of about 720 nm (nanometers,) to violet with a wavelength of about 380 nm, with orange, yellow, green, blue and indigo between. The 3 different types of color receptors in the retina of the human eye respond most strongly to red, green, and blue wavelengths, giving us color vision.

The first steps towards correctly explaining the color of the sky were taken by John Tyndall in 1859. He discovered that when light passes through a clear fluid holding small particles in suspension, shorter blue wavelengths are scattered more strongly than red.

This, most correctly called the Tyndall effect, physicists more commonly know it as Rayleigh scattering, after Lord Rayleigh, he studied it in more detail a few years later.

More Info: math.ucr.edu