There are basically two types of wainscoting to consider.
The first is called "applique" or "applied." This look is achieved by using a chair-rail moulding as well as a panel mould to make up the "boxes" or "squares" below. Your baseboards do not need to be removed and both of these mouldings are nailed right over the existing drywall.
The second is called "recessed panel." In this case, we would start by removing your existing baseboards. We then install build-out panels to give us the "recessed" look. Finally, we add the chair-rail, panel mould, baseboards and shoe mould. This option is more expensive than the first, due to the fact that there are more materials involved and the installation process is much more labour intensive.
Once the wainscoting installation is complete, we can then look at getting started on painting. Traditionally, wainscoting is painted using the same semi-gloss trim paint that is used on doors and trim.
There are literally hundreds of moulding options and combinations to choose from that will allow you to fully customize your own style of wainscoting. Wainscoting adds timeless beauty and elegance to any room and the possibilities are endless.