It's fun to hear all the different ways people have introduced chess at home!
I wanted to start playing chess with my 5 yo son, so I started playing chess with my husband in front of our son.
We played speed chess (since speed chess doesn't allow you much time between moves, this is less boring for a beginner to watch).
My son started sitting on his dad's lap, then after a few games his dad would whisper, "Ah, let's move our queen here and get her bishop--ha ha!" and point how my son could move the piece.
After a while, my son started making suggestions, then taking initiative. We counted the time loudly when someone took too long to move, and did dances when we had a good move. We played every morning and had fun as a family.
After a while, our son made up his own versions of chess, and we played by his rules. It turns out there are lots of variations of chess, so it's fun if both parent and child are learning strategy at the same time--some include setting up the board differently, giving pieces different powers, using checkers as well as chess pieces--guess there are whole articles written about the variations, so we have found these fun, e.g. Chess960, see overview of options at
http://en.wikipedia.org/wiki/Chess_variant). I think it's great to play with chess and experiment!
Now our son plays orthodox chess (beat his dad this afternoon) but also has fun experimenting. I was a miserable chess player at first (had only played a few times), so this was a fun way for me to learn as well (and speed chess helped even the playing field with my husband)!
Hope you guys have fun whatever way works best for you!