I explained this to my four year old by taking the abstract out.. Time is pretty abstract, and hard to grasp at first. But it just so happens that a year (and a day, and a month) have very real, non abstract meanings. 4 year olds are able to grasp that there are planets out there and that they rotate around the sun (wether they grasp the specifics isn't important), and there's great ways to show/demonstrate how things work in this department!
Then all that's left is telling them that on new year we celebrate that the earth has made another circle around the sun, and that we're grateful for yet another cycle of seasons. (And while you're at it you can also use movement of planets/moons to explain our concept of day/month)
I heard him explain it (quite perfectly) to his 2 year old sister the other day, so the way we explained it must've left a pretty good understanding of how this works and why we divide up time the way we do.