Wainscoting comes in two basic forms. You can get actual wood pieces that slide together or you can go the easy/cheap route of 4'x8' sheets of MDF wainscoting, which is what I opted for. The height is somewhat up to you but by using 32" I was able to get 12' in length out of a single sheet and maximize the value. I painted it ahead of time, but that could just as easily be done after. To mount it to the wall I used a combination of liquid nails paneling adhesive spread across the back as well as crown staples from an air nailer across the very top and bottom where they will be covered by molding. Caulk was applied where the different panels joined and the paint was touched up later.
The upper molding is MDF chair rail. To save a few bucks look for pieces that are damaged on the end. Most hardware stores will readily mark these off and you can just cut them down to the good parts. This worked out well since I didn't have a single 8' continuous run in the whole bathroom. The lower molding is actually finger casing traditionally used around windows, but there was a big discount on a bulk pack so it worked just as well. I painted the molding ahead of time and attached them using an air nailer into the studs (try to mark the location of the studs before the wainscoting goes up).