Do you mean groups as in user management, or Spaces?
Support for nested LDAP groups for user management has been available since Confluence 3.5, see http://confluence.atlassian.com/display/DOC/Configuring+User+Directories for details.
If you mean nested Spaces then Confluence still does not support this natively, but there are a couple of plugins that provide this functionality:
I notice your question is tagged as "confluence-ondemand". Is that because you're thinking of using OnDemand, or because that is what you have already chosen? If you are currently undecided about OnDemand or the download version and nested groups/spaces as a key feature for you it's worth mentioning that the information I've provided only applies to the download version as you cannot use LDAP with OnDemand and you cannot install plugins in addition to those provided by Atlassian.
Does that help?
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