The process you refer to is called fabric walling. The traditional method is to batten out the walls and stretch fabric over the battens, creating a cushioned effect. It is a popular technique in France. We have a section in our Curtains, Blinds & Soft Furnishings category dedicated to Fabric Walling specialists. One company with specialist expertise is Ketcher & Moore; another is Mille Couleurs. An alternative to this method is wallpapering with paper-backed fabric.