This sounds rather beep. ALL THREE kids simultaneously became rather suddenly involved in such active sexual activity ? Curiousity is normal at these ages ; maybe some mild exploration isn't uncommon, but so much elaborate activity isn't usual at all, and a joint assessment by a good local child psychiatrist or child psychologist would be adviseable.
As Maria wisely points out, much depends on whether and in what way you and your husband have discussed sex with these kids, and what they actually understand about it. Where I'm not clear about Maria's comment, is that while it'd be OK for each child to experiment sexually with themselves, doing it jointly is NOT a good idea. And I wonder about the story of them discovering some riscarded porn in a nearby alley --- it doesn't tend to get just thrown away like thast, and there could be someone else actually involved in whatever has been going on
I agree with Tango that this is dysfunctional and suggests that there is more that has been going wrong here than just sexual activity.