Yes, it is possible, but not from USB. You need to do that from hard drive.
First you need to make bootable ISO file. I have used Imgburn, it's a good and free program. After that you need to copy that ISO file onto a hard drive in your computer where you want to install guest in VirtualBox. I put it on the desktop.
Then start up VirtualBox and go to Settings → Storage. You will see "IDE Controller/empty" option. Click on empty disk to mark it. On the right side you will see Attributes, CD/DVD option. Choose "IDE Secondary master".
Then click on disk icon on the right and click on "Choose a virtual CD/DVD file...". A window will open, choose your bootable ISO file and click OK at bottom right. Then go to your VirtualBox start menu, select the virtual drive you made and click Start. It will run the installation.
This way I have installed Windows 7 as a guest on Ubuntu 12.04.