A dado (day-doe) refers to the area below a chair rail (aka dado rail or skirting board). The lower boundary is typically a baseboard.
The original function of the chair rail was to stop chairs from damaging the wall. The space below the rail quickly developed into a design opportunity.
If the look of paneling is desired, use trompe l’oeil techniques to create a 3-D illusion (as seen below)
A dado can also refer to the flat, central part of a pedestal or pilaster (I call it the shaft).