Wood paneling was originally developed as a practicality, providing insulation and covered up any damp that infiltrated cold stone walls but really became hugely popular in the 1970s largely due to the fact that it was reasonably affordable due to them being made of inexpensive plywood, but real wood was also used.
Its popularity didn’t last as many homeowners phased out the dark and dreary feature in favor of neutral or brightly painted drywall.