They were originally an extremely practical feature, in common with much of Victorian interior design.
Up to the dado rail woukd be papered with something like Lincrusta- a very strong embossed or textured “paper” and then possibly painted with (usually) gloss paint which could be wiped and washed. Above the rail, as far as the picture rail, would be wall paper so a lot less expensive than papering whole walls and having to cope with scuff marks, fingerprints etc at the lower level.
From the Lincrusta website
1877
Lincrusta was the ingenious invention of Frederick Walton, who had pioneered the development of linoleum floor coverings in the 1860’s. Heralded as the first washable wallcovering, Lincrusta was an instant success, replacing painstaking artisan plasterwork and appealing to Victorian England’s tastes because of its sanitary properties as well as its beauty, practicality and durability.
Originally patented as Linoleum Muralis (Linoleum for walls), its name soon changed to Lincrusta-Walton – Lin for Linum (flax, from which linseed oil is made) and Crusta (Relief), with the inventor’s name being added to prevent others using the same title
Had to suppress a grin when one of our daughters spoke of a “dildo rail” though!