The easiest, least expensive way to install wainscoting is to use prefabricated bead-board sheets. Coming in 4 x 8-foot panels, the bead-board is produced with the characteristic vertical grooves, so all you have to do is install and finish it. After the panels are in place, reattach the baseboard and install a top chair rail to complete the look.
Cheap and Easy
Depending on the type of paneling you choose, installing wainscoting is far less expensive than purchasing the solid tongue and groove lumber necessary to make authentic wainscoting. Decorative, raised panels are pricier, but standard vertically-grooved bead-board isn't cost prohibitive. Take the proper measurements, set an even chalk line to guide the positioning of the panels and make the necessary holes for any fixtures. Glue and/or nail the panels to the walls, reinstall the baseboard and chair rail and finish it.