It's silly to assume that kids don't realize that there are differences in ability, they see it everyday in class. In general I believe in telling my son the truth, that brains matter, but effort is just as important. The latter point may not be as obvious to them if they don't encounter challenging material in school and is why it is so important for kids to be taught at their level. If they aren't challenged from an early age, they don't know that studying/working hard is important and will struggle later on as material becomes more difficult.