More accurately, Rosetta doesn't support kernel extensions, and it will not run software that virtualizes x86 machines.

But it's not as if you can't run a virtual machine native to the platform. Qemu works on M1, Parallels works on M1 (ARM VM only) and there is a preview for VMWare's Hypervisor that will run even Windows 11 on the M1, but the VM software is native code (but not necessarily the system in the VM), so Rosetta isn't used.