Repairing Paneling
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Step
Step
Step
Identify and mark the edges of the panel that is damaged.
Pry off the baseboard and top molding by inserting a putty knife, then a pry bar.  Pull nails with pliers.  Then pull the panel off the wall.  Start at the bottom, where there's usually no adhesive.  Pull nails as they pop.
Continue prying the panel away from bottom to top.  Use a wood block to protect adjacent panels.  Make sure to remove all the old adhesive with a scraper or chisel.
If you scratch or mar paneling, you usually can make a cosmetic repair in a few minutes with paste wax or a crayonlike touch-up stick.  Don't try to spot-sand and refinish prefinished paneling; you risk doing more harm than good.
Step
Apply panel adhesive to the studs with a caulking gun.  Then nail the panel loosely at the top and wedge out, until the adhesive gets tacky.  Finally, press the panel into place, tapping it against the studs, and nail edges with color matched brads or nails.
related video: installing decorative wall paneling
Here's how to install beaded plank and other types of decorative wall paneling.
Materials: 
1.  Hammer
2.  Prybar
3.  Putty Knife
4.  Pliers
5.  Caulking Gun
6.  Adhesive
Time: 1 Hour
Skill: DIYer
If a panel has suffered serious damage, you'll have to replace an entire 4x8 section.  Finding a match among the myriad styles and finishes offered by the manufacturers may be your biggest challenge.

If your paneling was glued directly to drywall, you may have to replace the drywall before putting your patch in place.  If there's electrical wiring anywhere in the wall you're working on, shut off the power to the circuit before doing any cutting, sawing, or drilling.

I've included a photo of tongue and groove paneling to give you an idea of other paneling applications.
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Repair Paneling

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