Wood paneling can often be painted.

Well my buddy hung 1/4 inch Sheetrock over the whole basement walls dunno how but it looked amazing!!??

We covered our paneling with wrinkled brown bag paper. We put it on using wall paper glue. Small(ish) sized pieces waded up then smoothed out. Covered in glue and layered over each other. After 24 hours to allow for complete drying we sanded (lightly) any rough edges to give it a smooth transition from piece to piece. Waited another 24 hours (because I'm a worry wart!) Then we painted it. When all is said and done it looks like suede on your walls. Very nice, extremely cheap and beautiful! Don't forget to strip everything off the paneling before you begin!

Looks like the paneling that I had in my den. Not really wood planks. You could paint or wallpaper, but make sure you prepare the surface and get rid of the shine. There are good how-to articles on the web. Here's one: http://www.bhg.com/decorating/home-accessories/wall-art/how-to-paint-wood-paneling/

There might not be sheet-rock under the paneling. So if you take it down you might have to put up sheet rock.

Paint it white http://houzz.com/photos/4615065

I would paint it a soft beige

As an imaginative solution you could get plasterboard and cut out "windows" that show the wood panelling through it. So you don't remove it but add visual interest...My problem is that it seems to clash with the floor colour, so a white wall (with panel windows of wood) could ease the difference between the two.Of course, painting is the easiest option.

Paint it white, you will be surprised how good it looks!