This is paneling that has been painted. It may have been painted a few times over the years and it may feel more like drywall, but its going to be thin wood paneling. You can remove a light switch cover or outlet cover in the room and look at the cut edge of the material to verify this.
Updating this is going to be a big job, and removing the shelving will be the least of it. Knock on the walls and see if they sound hollow. Some times paneling is put up directly on the studs. If it has a more solid sound (still hollow, it is a wall) then it could be paneling over drywall. The electrical outlet inspection could also reveal this.
If it's over drywall, you can remove the paneling and finish the underlying drywall. It may have holes to repair and be in worse shape than the usual drywall. The other option is just covering what's there with a new layer of 1/4" drywall.
If it's directly over the studs and has no drywall under it, its probably best to remove it all, inspect the walls, and put up new drywall.
Low effort option - prime the wall and use wood filler to fill all the cracks. Sand, prime again and paint. The wood filler may eventually crack or look different from the rest of the wall, but good surface prep should help it last.