Before the age of gypsum and drywall, interior plaster walls were vulnerable to all sorts of potential damage. Hence the paneled wall, and the wainscot—a protective and decorative covering for the lower third (or so) of the wall. Early wainscots were always wood, but later innovations would introduce many alternatives.
A wainscot beneath the chair rail is a treatment that goes back to colonial times. Yet wainscots were secondary to the main event: floor-to-ceiling wall paneling, the method of choice for protecting walls for more than two centuries. Usually found in the main room of early colonial homes, the oldest wall panels were rough or hand-planed boards or planks. Entire rooms were paneled. If paneling was applied to only one elevation, invariably it was the fireplace wall, where paneling served as an extended surround and a handy place to conceal niches or shallow cabinets.
Raised-panel walls didn’t become fashionable until about 1750 or so, when builders of finer homes began incorporating details in the Georgian style, lifted from English pattern books. Far more sophisticated than plank paneling, raised panels can be configured to create focal points around architectural elements: fireplace openings, doors, windows. When panels are combined in a sophisticated, balanced design, the room takes on added dimension and looks “finished” in the same way that a piece of good furniture does. Raised paneling was popular in entry foyers, staircases, and receiving rooms like parlors. Check out my listings that feature beautiful paneling.
Information from OldHouseOnline.com