Refers to a facility that cares for and raises children, especially those without parents. Can also be used for a nursery school or childcare institution, though 保育園 is more common for standard daycare.
She volunteers at an orphanage.
After the war, many orphans were placed in orphanages.
孤児院 explicitly means 'orphanage' and is more direct, while 育児院 can have a broader sense including nursery functions.
Compound of 育児 (childcare) + 院 (institution). The term is straightforward and modern, with no obscure historical derivation.