From here...
http://www.coatings.org.uk/default.asp?edit_id=316&nav=293&branch=5
Blistering is when a paint or varnish forms bubbles on the surface. This could be due to too much paint being applied in one go, moisture trapped in the underlying plaster, using non-heat-resistant paints near sources of extreme heat. Blistering can also occur if an underlying wallpaper has not been hung using sufficient adhesive as the addition of a coat of paint could cause it to ‘bubble’ (remember though that if painting over lining paper, blistering that appears within a few minutes of painting usually flattens out during the drying process). To rectify, the blistered paint must be removed, and the surface made clean and dry prior to repainting with an appropriate paint, either one that is permeable (where damp) or heat-resistant if required.
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I would guess paint put on too thickly - second coat applied before first coat is dry from my experience...
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Wallpaper tip (essential) apply paste up the middle and brush out towards the edges ensuring it is all covered with NO dry spots. Leave it to soak into the paper for at least 3 minutes (I have a smoke) - while you are waiting you can be pasting up the next piece. Slap it on the wall and position it - use a dry rag to firm it into place up the centre - then wipe outwards towards the edge seams - wipe off any excess paste with a slightly damp sponge. Atend to top and bottom. Paste sheet 3 and apply sheet 2 etc etc.
If bubles appear in the wallpaper as it dries (and they probably will) - Ignore them - they will be gone the next day.
Good luck...
Peccavi
March 2010