cannot install ATI driver

I am running ubuntu in Virtual Box.

You do not use the ati drivers in virtual box, virtualbox uses virtualised hardware so the video card is also virtualised. You will not get a decent 3D performanceto play games so if this is your goal you need a new solution.

You can see this by running:

lspci

You need to tell the system to download the guestadditions iso, then shutdown the system and set the CD to mount at boot (just makes life easier) then run the correct script on the CD. This will then install the video modules needed to get a higher display than 800x600.
Here is where to click to get the CD downloaded:
http://www.dedoimedo.com/images/computers/2008/virtualbox-install-guest-additions.jpg

Here is an xorg.conf file you should use to get the system running:

Section "Device"
 Identifier "Configured Video Device"
 Driver "vboxvideo"
EndSection

Section "Monitor"
 Identifier "Configured Monitor"
 Option "DPMS"
EndSection

Section "Screen"
 Identifier "Default Screen"
 Monitor "Configured Monitor"
 Device "Configured Video Device"
 DefaultDepth 24
 SubSection "Display"
  Depth 24
  Modes "1024x768"
 EndSubSection
EndSection

Section "ServerLayout"
 Identifier "Default Layout"
 Screen "Default Screen"
EndSection

As I said, you will not be able to play games in virtualbox so look into wine or even the game manufacturers site for support (Companies like ID love linux) or look on the appdb for compatibility with wine.