I explained it like that: like in the real world, you do not just exist, but you are somewhere, _always_. That's also true for using the shell (afaik; correct me if you know better, please). It's even the same under Windows: even without an Explorer open and no other programme in your way, you are on your desktop, which is just another directory! Not sure, if this covers Windows 8+, though.

I tried to build the mental image of how the shell works by showing the similarities to something they already know.