How does a pilot tell passengers to prepare for severe turbulence without causing panic?
Turbulence is reported on a scale of light, moderate, severe, and extreme.  The full definitions are available in the FAA Aeronautical Information Manual. As experienced in the cabin,


For Light Turbulence, "Occupants may feel a slight strain against belts or shoulder straps. Unsecured objects may be displaced slightly. Food service may be conducted and little or no difficulty is encountered in walking."
For Moderate Turbulence, "Occupants feel definite strains against seat belts or shoulder straps. Unsecured objects are dislodged. Food service and walking are difficult."
For Severe Turbulence, "Occupants are forced violently against seat belts or shoulder straps. Unsecured objects are tossed about. Food service and walking are impossible."
Extreme Turbulence is "turbulence in which the aircraft is violently tossed about and is practically impossible to control. It may causes structural damage."


As a pilot, once the ride gets to the point of light turbulence (and not just light chop), I'll probably ask the flight attendants to go ahead &amp; sit down.  Even though they might be able to serve, I don't want them out in the middle of the aircraft if things get worse &amp; then they'd have nowhere to sit.  That may not be a PA announcement; I may just call them on the interphone &amp; say something to the effect of, "ATC says this is probably going to last for a while, so why don't you guys go ahead &amp; take your seats for a bit."  If we find out that the ride is about to get bad soon &amp; suddenly, that's when I'll typically use the PA and be more directive: "Flight attendants, take your seats; flight attendants please take your seats."

In moderate turbulence, there's no question but that everybody needs to be sitting down.  And I'll be looking for better options (typically, changing altitude) in order to get a better ride.  Sometimes a better altitude is available, and some times you just have to ride it out.

I won't intentionally fly into severe turbulence.  If I know before takeoff that the only way to complete the flight is to transit an area of severe turbulence, I won't take off.  If it's possible to work out a different routing and/or altitude(s) that avoid all the areas of known &amp; forecast severe turbulence, then we can plan on that, but you won't find me ever explaining to passengers before the flight that we'll be flying through severe turbulence today.  Not unless we're the last flight out of Saigon before it gets overrun by the murderous hordes, but I don't really foresee that scenario.

If you do fly into severe turbulence despite the best precautions, you've (hopefully!) already got everybody seated since you were probably expecting moderate turbulence anyway.  After landing, the aircraft will need to be inspected, because any encounter with turbulence classified as severe requires an inspection before the aircraft can fly again.  Typically, no problems are found (airliners are built pretty sturdy these days), but a mechanic will check all the things that might be over-stressed or damaged in that sort of an encounter in order to ensure that everything is still good to go fly again.

As far as preflight PA's when we're expecting light or moderate turbulence, that depends a little bit on the situation.  If it's a short flight with enough time in some sort of turbulence, I'll coordinate with the flight attendants ahead of time to not bother trying to serve, and then on the "welcome aboard" PA I'll explain that situation to the passengers.  The ride is forecast to be pretty bumpy, and so to keep our flight attendants safe, and since I'm sure nobody wants hot coffee spilled in their laps, I've asked our flight attendants to remain seated for the flight and not attempt any beverage service. So sorry, it's all about safety, thank you for your understanding, blah blah blah, and since they'll be staying seated, we do ask that you also observe the Fasten Seatbelt sign and remain seated for the short duration of the flight today as well."

If only a small part of the flight is expected to be turbulent, I probably won't say much about it at the gate (the Flight Attendants cover "stay seated while the seatbelt sign in on" at length), and then maybe as we're getting close, I'll mention something just to reinforce what they say on the PA.  But if there's nothing special to communicate, I don't see great value in creating apprehension before the flight about an interval of turbulence that we may end up avoiding altogether.

Some pilots to make it part of their preflight PA's to re-emphasize the Fasten Seatbelt sign and stress again that we want you seated when it's on.  That's an individual pilot's preference (at least at my company).  Our guidelines recommend against using the word "turbulence" because it does cause apprehension, and instead talk about a choppy ride or rough air or bumps in the road or whatever.  Conveys the same meaning to the passengers, while hopefully scaring the nervous fliers a little less.