The simplest way to give a paneled wall a new look is to paint over the paneling. This requires a quick once-over with sandpaper to rough up the finish on the paneling and then a coat of primer and a coat of paint. Oil-based products work best on wood paneling since they will penetrate the surface of the paneling. If the room was closed in by the paneling, choose a light color for this wall, such as white or ivory. This will open the space back up.
Instead of simply painting, you can add an extra step to completely hide the fact that the wall is paneled. This is accomplished by filling in the grooves in between the panels with joint compound and then sanding it smooth. Once this is done, the wall can be primed and painted. The finished effect looks just like a normal wall. This is ideal for those who truly hate the look of wood paneling but don't want to go to the expense and effort of removing it.
Wood paneling is typically attached to a wall in one of two ways. It may be nailed to the studs in the wall, or it may be glued with adhesive to the entire surface of the wall. If you plan to tear out the paneling, the method in which it was attached matters greatly. Adhesive can be stubborn, and you may end up damaging the drywall underneath the paneling while you are removing it. Nailed-up paneling is much easier to remove and can just be popped off the wall with a pry bar.
If ripping out the paneling is not an option, you can drywall over it to hide the panels completely. Drywall panels can be cut to fit with a utility knife and then screwed into place over the wood studs. For this application, drywall sheets that are a quarter-inch thick are best suited. Any thicker, and you will run into issues with your baseboards and window sills. While it is better to rip out the paneling and hang new drywall, this fix is a little quicker and less labor intensive.