Find the studs in the room. Use an electronic stud finder. It will indicate the location of the studs. Mark these studs with a pencil.
Cut the tongue off the first row of paneling. Use a circular saw. Keep the blade guide down and your fingers away from the blade. Feed the wood slowly through the saw and cut off the tongue. Do not push the wood through the saw -- this will create jagged edges.
Attach the first row of paneling. Work from the bottom up. Place the first panel on top of the baseboard, going horizontally. Nail it into place over the studs with a nail gun. Finish the first row.
Fit the next row together. Line up the tongues on the second row and place them into the grooves on the first row. Nail the boards into place with a nail gun on the studs. Repeat until the wall has been finished.
Finish the wood. If the wood was not pre-finished, sand it down with fine sandpaper. Apply wood stain or paint. Let this dry. Sand down the boards lightly. Apply a second coat of paint, or a coat of polyurethane if you stained the wood.