How to chose a right sized mountain (or all-terrain) bike for a kid?
It's hard to answer that question, because people and bikes can be built in many different ways. Bike fit is a complex art, but here's the crude and simple version: have the rider straddle the bike's top tube, feet flat on the ground. If there isn't at least a couple inches of space between bike and crotch, then the bike is too big. On the other hand, you don't want it so small that your knees are hitting the handlebars while pedaling.

For a bike that's mainly ridden on pavement, you want the seat high enough so that the legs are almost fully extended at the bottom of the stroke. For off-road riding, or for kids that are still learning to ride, you want it lower.