Because of the updated X server version in Ubuntu 10.10, the provided guest additions with the latest Virtualbox fail to install an appropriate X driver.
You are left with a functional, but tiny resolution because of no video driver:
Ok, so how do I fix this?
Until Virtualbox and / or their guest additions are updated, you can simply install this package, then reboot:
sudo apt-get install virtualbox-ose-guest-x11