Yes, ellipticals are much easier on your knees than other forms of exercise. When you use an elliptical, you are engaging in a low-impact exercise. On the other hand, running on a treadmill (or outside) can stress your knees and joints.
Regularly using an elliptical may actually help you strengthen the muscles that are around your knees. This is because the cardio workout you get when you use an elliptical helps increase blood flow to your knees' cartilage.