It's called Fraternal Birth-order effect, or 'older brother effect,' and recent science supports its claim. It is the strongest known biodemographic predictor of sexual orientation, and claims that the more older brothers a man has, the more likely he is to be gay.
Scientists are not exactly sure why it occurs, but they believe it is due to a maternal immune response after giving birth to a son. The mother's body reacts to the foreign H-Y antigens of her son, and creates antibodies to counteract them. These antibodies then remain in the mother's body the next time she gives birth. Although this theory is not unanimously supported, it is generally accepted, and for sons with older brothers, can increase the likelihood of homosexual tendencies up to 48%!
EDIT: To clarify, actual probability of a boy being gay or not is still relatively low (there's no consensus, but it's somewhere between 5- 10% of all males).
The fact deals with probabilities. Say... for example, your sister's kids (I'm assuming it's your sister) had this scenario:
Kid 1: 10% probability to be gay. Hit the 10%, he's gay
Kid 2: 11% probability. Didn't hit the 11%, not gay
Kid 3: 12% probability. Didn't hit the 12%, not gay
Kid 4: 13% probability. Didn't hit the 13%, not gay.
Kid 4 still was "more likely" to be gay than Kid 1, despite the end result of Kid 1 being gay and Kid 4 not being gay