The "elephant orphanage" is a refuge for old, maimed or otherwise unwanted elephants. It is extremely rare to see working elephants in Sri Lanka these days. You can see some in the wild if you are lucky and go on safari (such as Yala).
But these are rather artificial surroundings and the animals are not in the wild habitat, but I really I really can't understand the people who say "don't go there" or say the elephants are all chained up. It's just been the case when I have been there (more than once).
It was the same in April 2011 as it was in January 2006 on my previous visit and I loved it. At 2,000 LKR per head it is not a bargain, but it is a great way to see elephants close up and get some fabulous photos. The only thing I didn't like before was the feeding milk to the baby elephants from bottles (it may have changed in 5 years but probably not).
It's best to arrive so you get to see the elephants bathing. But before and after that they live across the road and most roam freely. Just a handful of elephants there have been chained up and they don't go down to the river either - that is for the safety of the public. The best time is when the siren sounds and the elephants all march en masse out of the river.
You can sit in a cafe and watch them from afar if you don't want to go close. I think it is great experience for all ages. Not sure I would make a special trip from Colombo just for that - but combine it with other sights in the Kandy area.
There was no free parking at Pinnawala so it also cost an additional 100 LKR on a piece of wasteland nearby. We didn't bother with the souvenir shops that also line the lane down to the river.
Our driver/guide made sure we got to see the elephants bathing and thought we would not want to go inside as well. But it is worth it and taking the time to enjoy the unique experience.