Non-sphericity specification in SPM5
In batch mode for factorial design specification, one can specify whether error variances are unequal across the levels of a factor and whether error variances are correlated between different levels of the same factor.
After the design has been specified, SPM.xVi.Vi will hold a cell array of non-sphericity component matrices. Each matrix should have as many rows and columns as you have images in your design. A 1 in a certain row i and column j means that images i and j are assumed to have dependent error covariance. Note the special case if i==j, this encodes for the error variance of image i.
If you are not satisfied with SPMs suggestions for error covariances, you can insert your own list of Vi components after design specification, before you estimate the model.
Verification of covariance specifications
Covariance components can be verified using SPMs Review Design facility - in the Menu there is an item called Explore Covariance structure.