Computer systems lacking in hardware virtualization support were incapable of running XP Mode on Windows 7. That's history now. Word is, Microsoft has stripped away the virtualization layer's hardware requirements for XP Mode offered in Windows 7. You may grab the patch from Microsoft's site as indicated in ARS Technica's report if your rig lacks VM capabilities.
ARS Technica - Microsoft made a slew of virtualization announcements today, affecting both current and future products. Arguably the most important tidbit is that the company has removed the virtualization layer's hardware requirements for the XP Mode available in Windows 7. Those already running XP Mode don't need to bother updating since they already have it working, but users who were unsure of their PC hardware can grab the update and try out XP Mode on Windows 7 Professional, Windows 7 Enterprise, or Windows 7 Ultimate. The update is available for Windows 7 32-bit (3.7MB) and Windows 7 64-bit (4.1MB).
Read more about it here.