How do you unlock all the characters?

One way is to go through the adventure mode.
But a few like Toon Link are found through hidden doors.
After you get so far in this mode tyou go to anterior levels to locate them.
I can't remember the details

The long way is to just play the game until you are challenged.
After so many total hours of game time a secret character challenges you .
Time spent on the menu screens does not count only the time spent fighting .

to unlock sonic you have to beat classic mode 10 times and the 10th time you beat classic mode you have to beat sonic to get him

normaly i just get them all in subspace so keep trying.

just play adventure mode

you unlock them:) xD

You can get them from SSE, but their is like two characters you can't get from it (Jigglypuff and Wolf).

I usually just play with a friend and they come and challenge u and u have to beat them to get them as a playable player although most characters are in the embassy

You can get every character from the Subspace Emissary. Toon Link, lobo and Jigglepuff are found in The Ruins, The Wilds, and The Forest. Or something like that.

yup i have!