Can anybody explain why the so called orb effect is not the result of lens flare ?
The only thing I can see special about orbs is that you are dealing with pin point sources of light.
To be honest I would not describe Alan's effect as an orb after studying various photos of the effect on the net.
The "flare" effect is the result of light scattering. In the "ideal perfect" lens the transfer of light should be 100%, Sadly this is never the case therefore all optical lens suffer from flare to some degree. When light meets the boundary of a different density material its direction of travel bends. Which means that some of the light will be reflected away and some will transfer through it. The light scattering in different directions is the effect we are seeing. Whether you want to call it orbs or flare is a matter of choice and convention. Slight light scattering usually just manifests itself as a reduced contrast because the scattered light is lightening dark areas. To what extent light is reflected or transfered is dependent on the angle of light striking the boundary surface. In the case of the optical crown glass - air boundary the critical angle of when most of the light is reflected away is approx 41 degrees.
The problem with compact style of cameras is that they use a tiny sensor. This requires the use of an ultra wide angle len (typically 5 to 7mm) to get a sensible field of view. The plus side is a great depth of field and close focusing. The down side is that you are more likely to see blemishes and other effects on the lens front element.
Andy's prime suspect of a thumb print or such is a possible cause of this flare. Remember a greasy thumb print is a material of a different density.
Lens coating is about using different density materials to your advantage.
An interesting study of the behaviour of light is the science of rainbows.
http://science.howstuffworks.com/rainbow2.htm