You paneling can easily painted as pam and bob have metioned in follow-ups. You would be surprised how painting the paneling can change the whole room, we had a family room with paneling and we sanded it to get rid of excess gloss, sprayed a coat of kilx and them painted it and left the grooves, it looked great. I hate paneling in all shapes sizes and forms (except wainscoating), I was ready to pull the paneling, patch the drywall and start over but just on a whim I tried painting it and like I said it turned out great.
If you have smooth paneling with the only grooves in it being every 4 feet (at the seams) simply slapping a coat of paint on it will probably look pretty bad. But if your paneling has grooves in it every so often the seams between panels will blend in with the grooves and will be barely noticable. In any case I would not recommend wallpapering over paneling. You would be better off removing the paneling and putting up drywall.