Challe's Home For Little Tykes
Challe herself (a troll female) stands next to the hut, watching over the babies inside. Two tykes, Sa'rah (a blood elf girl) and Chaddo (a human boy) run around the place, while a third named Jara (an orc boy) hides in a corner of the sandbox.
Inside the hut, however, is the first known night elf baby seen the in the game, as well as the first known troll and tauren babies.
There's a dog house just outside the fence with either food or the remains of the dog inside, as the meat is swarmed by flies and there is no dog to be found.
Behind the hut are three cages of varying sizes and types. In one is the remains of a small humanoid.
Before Patch 2.1.0, this place was deserted, save for the cute baby tauren in the merry-go-round, and the infants in cradles in the hut.
It was believed that Challe's Home may be used for the Outland quests during Children's Week, however that turned to be false with patch 2.1. Currently it seems Blizzard have no plans to do anything here, so we can only assume it is an easter egg.
The patch 2.1 also added babies to the Orphanage in Shattrath including gnome, dwarf and human babies which cannot be seen at Challe's.
How to find it
Challe's is located right on the edge between Nagrand and Zangarmarsh. To find it without coordinates, go to where the last "g" in "Laughing Skull Ruins" is on the map.
It was once speculated and then later confirmed through Warlords of Draenor that Challe is in fact devouring the children that end up here. Cages filled with "Little Tyke" sized bones can be found behind her hut.