How can I teach kids how to play Battleship?
Teach them two things: 


Don't let your ships touch each other.
Don't let your ships touch the sides.


By doing that, no matter where a ship is hit, there are at least two adjacent places to target that will be misses. 

Children less familiar with spatial concepts might take longer to place their ships, but there's also a lot of flexibility given those rules, so one niece could put all her ships facing the same direction while another one could have them alternating back and forth across the board. 

It may be useful to remember that there is a difference between teaching the game itself and teaching the game as you or someone else might play it. There will be time to teach them more specific strategies later if they become interested in the game and also show interest in strategic thinking; with this in mind, pay attention to how they respond to what you teach. If one niece doesn't seem interested in planning, let her put her ships where she likes. If another one questions you right away as you explain how to set up your ships &ndash; "But if I do that, you'll know what I'm doing!" &ndash; then you could probably go straight into more advanced techniques with her.