Looks like some kind of thin paneling that was installed long after the house was built. (Notice how it doesn't extend behind the window casing.).

Given that age of house, there is probably lath & plaster behind. Maybe not in very good shape and that's why the paneling was installed.

It does indeed look like whatever is covering the wall butts up against the window casing. It appears that the reveal is less than it should be.

A wild guess would be that initially someone tacked up cheap plywood paneling. This stuff, usually 1/8" to 1/4" thick, was popular in the 1960s and 1970s. I remember many articles in the home improvement magazines about how to panel your living room or family room with it. Plywood paneling wasn't just for looks; often it covered cracked plaster that the owner didn't want to try to deal with.

If so, what's on top of it? Again, guessing, there was (maybe still is) a heavy kind of unpatterned white wallpaper, I don't know what it was/is called, but I've seen it used in old houses to cover cracked plaster. Usually it was either papered over with a nice pattern on normal paper, or painted, So my guess is that some later owner who didn't like the paneling might have tried to cover it up with that heavy wallpaper. It would have hidden the "boards" notched into the surface of the fake paneling, to provide a smooth surface for painting.

But again, that's a guess. You'll know more if and when you strip all that stuff off the wall.

DavidR, that's exactly what it is--60-70's era paneling. I finally figured out the black stripe in the first photo. That's one of those painted stripes, maybe a groove, maybe not if the panelling was ultra cheap, that were intended to make the paneling look like reverse board & batten.

Then, some years later, someone came along and pasted up wallpaper or plaster liner & either painted it or papered over the liner. If the liner was papered over, then someone else came along and painted the wallpaper.

Looks like the paneling curled away from the wall, further burying the casing because there usually isn't anything to nail to next to the casing (or the nails were too short or lost purchase in old dried out splitting wood lath ends.) Plus it probably got wet when someone left the window open & it rained, causing the paneling to curl and delaminate. Or the glue between the plies just gave out because of age.

I think cilantro hit the nail on the head.