You've probably been wondering about this ever since you had kids. Those rubber rooms in the movies -- you know, the ones in the sanatoriums that always seem to have great landscaping -- have soft walls look so clean and safe. You may want to avoid the mental ward route (if you can manage it), but that doesn't mean you can't take a hint from the décor. Soft wall treatments give a room personality and a cuddly quality a simple coat of paint just can't match.
There are a number of ways to go, here. You can use one of the dozens of specialty paint techniques designed to look like everything from leather to lichen. You can actually apply fabric to the walls, too. This works well when you have a chair rail around the room. You can apply fabric with liquid starch above or below the rail without having to mar your walls -- and unlike wallpaper, it's as easy to remove as it is to apply.