TechOverflow.net has a great guide on getting this done.

Install – xserver-xorg-video-dummy

sudo apt-get install xserver-xorg-video-dummy

The guide at AskUbuntu does work but only seems to support a 1028×800 resolution – AskUbuntu.com.

Then, update or create /etc/X11/10-xorg-dummy.conf (Can really be called anything you like)

If you want a higher resolution the following .conf at techoverflow.net should work. If the tech-overflow.net link is no longer valid a copy of the conf file needed is available here – PasteBin.