Depends on your paneling. Can you post pics?

Yes, it depends. I've also seen paneling with the grooves filled in and sanded and looks great. Painted paneling doesn't look horrible. Be sure to do a couple of primer coats then paint. It will look fine and a lot better than old paneling! Here is paneling primed and painted. Looks nice!

There are several websites, if you google painting over paneling, that pops up that will give you detailed instructions on how to paint over your paneling. I know this because I was considering painting over my knotty pine paneling in my family room but have decided not to because everyone loves it.

Thank you everyone so much for the comments. I expected that it would take days to hear back from anyone. I have posted photos as requested. The paneling is dating the basement.

Is it knotty pine paneling of cheap 1/4" 4x8 sheets of paneling? Big difference in the final look.

Plus, if you paint paneling and it still looks like a basement (low ceiling, pipes, ducts, cellar floor, etc.), it will all look bad. To make painted paneling look good, you need to make a good looking room for it to enclose

Paneling MUST be cleaned with a TSP solution first. If it is older, most likely it has absorbed nicotine or cigarette smoke. It should be sanded. You can use liquid sander for this step. Prime with KILZ paint. This will help cover any stains, smell, mildew or bleed through. Two coats of a VERY good quality paint are necessary. Be advised. If you have old ceiling tiles, they will look very dingy next to a new paint. My advice is to not paint the paneling white. Any other satin paint color will look fine. Do not use flat paint. It may scratch easily. If prep is done properly, it can look good.

If you do decide to paint the ceiling tiles, use KILZ first and then two coats of paint. This is time consuming and does not always give satisfactory results because of the metal rails that hold up the tiles. Once the ceiling tiles are painted, they will no longer be soundproof. Older basements put in ceiling tiles not only to cover ductwork and pipes for also for soundproofing.

There are some companies that spray paint basement ceiling tiles and paneling. Check around. Results look pretty good.

I don't think you have much to lose. I would try prepping and painting some of it. You will know pretty quickly if it is going the direction you want it to. If it doesn't look promising, switch gears and go the drywall route.

Make sure your prep is meticulous , clean with TSP then prime with a shellac based primer and if it is a puzzle about the type of wood use 2 coats primer before doing 2 coats of paint.

We painted our paneling and love it...don't even notice the grooves. We dusted the walls, then used kiltz. Then, depending on your paint or color may have to give it two coats. We painted our paneling white and a few years later a soft yellow. Be sure you use a good brand of paint and since it is your basement, let paint dry between coats...but you know that. If you paint your paneling, you will be surprised how clean and light it looks.