ADDING SPACE: The proper lighting will lend a feeling of spaciousness to your room. Start by lighting the room with a soft, even light. It is a good rule to avoid ceiling lights as they tend to make the ceiling feel lower, thereby giving a closed-in feeling. The best type of lighting is diffused lighting when you need to make a small room seem a bit larger than it really is.
ADDING WARMTH: To create a cozy feeling in a room you will start by adding a warm glow from incandescent lamps, rather than halogen or florescent. Reading lamps, shaded lamps, and such will add warmth, as they only give off light in the immediate area in which they are placed.
You should see this article for additional tips for transforming your room using colors. Discover which colors make a room feel warm, which colors add energy, which colors give a feeling of spaciousness, and more.