When it happens, which it does regularly at Festivals, I simply say "There's a lot of stuff up here that could hurt your kid if it fell on him. Let's get all the kids sitting on the ground in front of the stage, and I'll do a few songs for them." Usually works a treat.
Or, if I'm really feeling sarky, "Welcome to the Seamus Kennedy Show and Day Care Center.
Drop 'em off here and go to the bar. I can't gurantee that they'll be here when you get back."
However, since I sell my kids' CD at festivals, I usually take the first approach.
A little thing that works well for me is this: after I've done a bunch of kids' songs I'll say,
"Hey kids, if your Mommy and daddy really love you, they'll buy you my kids' CD. If you children leave without one of my CDs, it means that your Mommy and Daddy don't really love you, and they're gonna drive away and leave you here; and you'll never, ever see them again. And you'll get eaten by the giant jellyfish which ooze up out of the pond (or river, or lake) to seek out little kids who don't have my CD."
I usually move a shitload of 'em after that spiel.

Seamuas