Welcome to the world of boys. I have the first boy in the extended family and it is amazing how different they are!
It is completely normal behavior for a boy of that age to 'discover' his private parts! When my now 4 1/2 year old started that, I would simply tell him that we didn't play with our private parts in front of other people and tell him to get his hand out of his pants. I didn't want to make him seem like he was doing anything dirty, but I wanted him to know that was not acceptable behavior in front of others.
This method worked for me!
Enjoy your little boy!! I know that my mom and I are loving ours!!