I would try and pull an outlet or a light swithc off and see what the paneling is attacehd to. Most paneling isn't attached directly to the studs and is glued and/or nailed to drywall or plaster. You may have to spend some time patching and removing glue from the wall before to texture and paint. I would not recomed adding drywall unless our are planing on replaceing all the door and window trim as you will need to remove this and add jamb extensions to the doors and windows.
Depending on what your plan is for the house your may be able to paint over it. You'll just need to use a good primer to make sure the paint sticks. If it is a flip I would think you would need to remove it, but if your planing on renting it I think painting over it would be fine.
A house i bought reacently had a lot of paneling. There was one room that was all paneling and we decided to remove all the paneling. We thought about adding drywall but as mentioned above it opend up a whole new can of worms at the door and window jambs and heads. It was a little time consuming to remove the glue and patch but we felt it was easier than adding drywall that would still need to be taped and mudded.
In other rooms the paneling was just used as a accent wall or wainscotting. thats where we decided to paint since it wasn't the entire room and provided a good accent.