You've basically got two options, 1. you can paint it. Depending on the texture of the wall panels this can actually look pretty good. You'll probably have to spend some time getting into all the knocks and crannies with a paint brush but this is probably the easiest option. or 2. you can cover them up. If you want a more contemporary look you can just install drywall over top of the existing wall paneling, or remove the wall paneling (my preference) and install new drywall to the existing wall structure. This will take a lot more time, and you'll still have to paint the drywall after it's installed, but it will give you the best results.
Do I have to sand or remove the glossy finish on the paneling before I paint it?
Prime it,then paint it (using rollers that have thicker/longer nap) this is cheapest remodel and will brighten room 100% make walls easier to clean too.
Carol: I painted my paneling! (It's the wall between the bookshelves and fireplace)