I've had to explain many fish deaths, a frog death, and a hedgehog death to my 3 year old...
I just tell her that they died and it means they're not coming back. In the case of our hedgehog he was sick for a while leading up to it so I tried to put a positive spin on it by saying that he wasn't sick anymore, he got to sleep now, etc. We had a burial for him and she said goodbye.
With the fish it's a bit more frequent and less noticeable so I just say that the fish died (which she now at least sort of understands to mean 'not alive' and not coming back) and she gets sad but she says goodbye and then asks if the fish gets to sleep now...to which I say yes, it's like the fish is sleeping but it won't wake up. She seems pretty okay with that.
I know some people like to steer clear of death with young children but I personally feel that being honest about it from the beginning is healthy. I mean obviously you're not going to explain the gory details to a 3 year old, but trying to explain it honestly without making it a big, scary thing is what I feel is best.