Many small hotels do not take credit cards. This past summer in Sicily we stayed at two very small B&B's - both of which were great. The first, Baglio Spano near Marsala, asked for a bank draft in the amount of one nights deposit. I used my local bank to send this but reading here and later research leads me to believe that xe.com might have saved me a few dollars. I did wonder what would happen if cancelled, would we really get our money back, but sometimes you just have to have faith!
I actually felt MUCH more uncomfortable about our 2nd place which required NO down payment, no credit card, etc. I wondered if we really had a reservation? Of course we did, and the hotel, Palazzo Giovanni, situated between Catania and Taormina was a real find. In general we found that we were able to use our credit cards less freqently in Italy-we went to the ATM's almost daily and withdrew the max from 2 accounts in order to pay cash for our family of 4. Not a problem-just different.