This "underlayment" fibre-paper can be used over any rough or uneven surfaces (like paneling, concrete block, brick, etc.). You are then supposed to paint or wallpaper over it (usually wallpaper).
Is the wood paneling "photo wood", or is it the real walnut tongue and groove stuff from the 70's? That real wood paneling from the 70's looks absolutely fabulous when painted out in something like a warm cream color. Painted wood paneling is a very highly sought after decorator touch (check out the magazines), so don't give up something that may be one of your home's great assets.
If it's the real stuff, clean it with TSP -- a detergent sold at almost any hardware store. The TSP will remove any oily/waxy finished which may exist on the surface of the wood, then just VERY LIGHTLY sand the surface to give the wood some "tooth" for the primer to adhere to. Then prime and paint.
Of course, with the cost of wood today, it's probably worth a fortune, so you may want to consider tearing it off the wall and selling it by the board foot, and then just use the proceeds buy some drywall and possibly new furniture with gold plating! (Joke)
If it's that photowood stuff, then you will probably want to consider the underlayment material. The only problem is that the finished wall surface only turns out as well as the underlayment is put on. If there are visible seams, bubbles, wrinkles, or anything like that in the fibreglass underlayment, the finished wallpaper will still never look quite right. And remember, it's something that's surface applied, so it, too, stand a chance of peeling off over time.
You can probably even get underlayment at places like American Blind and Wallpaper Factory on line: www.decoratetoday.com.