You can end up having to spend time in a poky room for a number of reasons. You could be in a bedsit. You could be using the small room that nobody wants as a home office, or you could be on a tight budget and a small house is all you can afford. Small rooms have their challenges for decorating, as you need to make your small room liveable and comfortable, but without being claustrophobic.
Let's begin with colour. Dark colours make a room appear smaller. In clothing, it's well known that black and dark colours are very slimming. These colours will also "slim" your room and make it appear smaller. Avoid dark colours in large amounts in a small room, especially on the walls or (even worse) the ceiling, as this will turn your little room into something resembling a dungeon or cave (which might be all right for a short time, but you will not find it liveable for long). Darker colours are all right in smaller amounts and low down (e.g. carpets). But keep to lighter colours as the basis for your decorating palette.
Secondly, consider lighting. Windows and natural light give a sense of space and openness, even if the room is actually small. Once again, this is related to the narrowing/slimming effect of darkness. Even if all you are able to do is to add a skylight to allow more natural light in, do so. Another old decorator's trick is to use mirrors in strategic locations. Mirrors will reflect light back into a room rather than absorbing it, and they give the illusion that there is more space in the room.
Have an eye for scale and proportion when choosing furniture. You may be able to fit a large, comfy sofa or a big leather-topped desk into the room and still have space to move comfortably, but larger items of furniture will seem out of proportion to the room and emphasise the smallness of the room. Yes, you will need to make sure that you have enough space to sit down and/or work, but choose items that aren't bulky - narrow legs and other details help here. Also watch out for the prints on upholstery - a big chintz floral looks out of place in a small room, even though it is bright and cheerful. Go for smaller prints like paisley or Laura Ashley style florals, or pinstripes, checks or plain colours. Don't clutter up horizontal surfaces with too many ornaments and nick-nacks. This will really make the room seem crowded and claustrophobic. The same goes for "busy" pictures on the walls with lots of detail. It can be hard getting the balance right with pictures, as a too-largepicture can look out of place, but little pictures can clutter. Tidy up as often as you can. While you wouldn't notice one small bit of dirt in a larger room, you will notice it more in a smaller room. However, looking on the bright side, you have less space to dust and vacuum in a smaller room.
Choose items that can provide hidden storage. Divans that have drawers underneath, trunks doubling as coffee tables and the old-fashioned type of piano stool that has a hollowed out seat (you sit on the "lid") help you get the most storage area for your space. Be careful, however, with items that stack. You may be able to stack boxes, containers or shelves up to the ceiling, but this may dwarf the room and emphasise the small space. However, if you are in a tall, thin room, this is a wise use of space. From a purely practical point of view, bookshelves are the best things to have going from floor to ceiling (if you must), even if the resulting "look" reminds people of a library. However, this does give something of an air of sophistication, culture and literary taste, even if the shelf is filled with paperback thrillers and romance books, cookbooks and CDs rather than the glossy art books and leather-bound Shakespeares that appear in interior decorating books (if you are a little ashamed of your collection of Mills and Boon romances with their distinctive pink hardcovers, scatter them around the shelves rather than storing them in a block).