You can also unlock charcters by playing a certain number of normal melees. After completing the number of melees required to unlock them, they will challenge you. This is good because it is easy if fight them again if you fail and you can choose the charcter you want. (Plus you can use the C-Stick!)

Character - Matches Until s/he Appears
Dr. Mario - 100
Pichu - 200
Falco - 300
Marth - 400
Young Link - 500
Ganondorf - 600
Mewtwo - 700
Luigi - 800
Roy - 900
Mr. Game & Watch - 1000

Jigglypuff must be done the normal way though.