It's about a woman who grew up in an old orphanage and later returned to re-open it as a home for children with special needs. Her son begins to speak of imaginary friends just before they allow in the other children, and soon disapears completely. What follows is a series of clues and highly unsettling events leading up to an incredibly horrific conclusion.
The movie is filled with masterful suspense and "not quite right" flair, rivaling classics like The Shining and the original The Haunting.
Roger Ebert said it best:
"Hitchcock was very wise about this. In his book-length conversation with Truffaut, he used a famous example to explain the difference between surprise and suspense. If people are seated at a table and a bomb explodes, that is surprise. If they are seated at a table, and you know there's a bomb under the table attached to a ticking clock, but they continue to play cards -- that's suspense.
There's a bomb under "The Orphanage" for excruciating stretches of time."
The movie also brings to mind "The Others" in it's plot and scare elements.