Hi Joe. Just last week I covered some paneling in my house. I have previously tried to paint it, it was okay for awhile but I was not pleased w/ the results. However, if that's what you want to do, don't forget to prime it first.
For me, wallpapering gave the best results. Buy a liner at your local wallpaper or paint store. It's about 8 or 9 bucks for a double roll. Sometimes, if you are lucky, you can find the prepasted kind. Otherwise you will have to add the paste yourself. It's a little more work, but well worth the effort. You have to apply the liner horizontally instead of vertically like most wallpapers. Then go back over it vertically w/ any kind of wallpaper that you choose. The reason for applying the liner in the opposite direction is that it will cover the seams in the paneling and make the wall seem flush under the decorative wallcovering.