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Furniture
Work with what you have. If the upholstery is looking a little worn, cover it with some cushions or throws, to draw the eye away from problem areas. This also works if the colour is outdated. Rearranging your furniture is always a good way of updating the look, too. By placing your most beautiful and fashionable pieces in a position where they will be noticed immediately, you will draw attention away from the less attractive furniture.
Instead of having one main, glaring light, why not buy a few lamps? This will provide some ambient lighting, which is great for setting the mood.
If the colour on your walls is a definite throw-back to a by-gone era, why not update it by painting one wall with the colour of the moment. This will serve to create a focal point, drawing attention away from the less attractive features of the room.
Accessories
These play an important part in creating the ambience of a room. Plants give a room a feeling of freshness; a tall one in the corner softens the edges and has a calming effect. Ornaments are also important, but don't go overboard. A mirror is a good idea for a small room, as it will have the effect of making the room look larger.
Cover an old carpet with a rug. If you have wooden floors underneath the carpet, why not pull up the carpet altogether and replace it with an attractive, stylish rug? For a sitting room, you could try a luxurious deep-pile rug and for a dining room something more functional and durable.