Wainscoting is the application of timber paneling to the lower part of the interior wall - below the dado or chair rail, and above the skirting. It is finished off with decorative beading along the top edge to create a smooth transition to the wall space above. In the 18th century, wainscoting served a practical purpose - acting as insulation against the cold stone walls of the time. Nowadays, it's function is purely decorative (though some would argue it is a little more robust then a simple painted, plasterboard wall finish!).
Another decorative wall treatment that you will often see in conjunction with wainscoting, is boiserie.
This is the creation of paneling using carved beading or raised moulding in rectangular forms across a wall to give an inset look. Traditionally, the panels had images or murals set into them, subsequently framed permanently on the walls (or even ceilings, doors and cupboards in places like the Palace of Versailles!).
Wicker and Stitch
Both wainscoting and boiserie are great methods for adding character to bland walls in more traditional spaces.
They allow the option of mix and matching plain paneling with patterned wallpaper or contrasting colours, creating interest and depth in an interior, and an authentic backdrop for similarly traditional furniture pieces. They are most effective in rooms with a higher then average stud (2.4 metres is standard in NZ). Visually they break the wall height down, creating an illusion of lower ceilings and therefore a more cosy feel.
The two terms are interchanged and confused a lot, but ultimately the aesthetic results are fantastic all the same!