To unlock the Sound Test, you must open all secret stages. This means you must also beat all 51 Events (since you get Final Destination from the 51st), and unlock all secret characters (since you need them to access the higher number events).
To unlock the Battlefield stage, complete the All-Star 1-P mode for the first time.
Stage Unlock: Big Blue Stage
To unlock the Big Blue stage, you must play at least 150 matches in VS. mode (without quitting).
Stage Unlock: Brinstar Depths Stage
To unlock the Brinstar Depths stage, you must play at least 50 matches in VS. mode.
Stage Unlock: Dream Land Past Stage
To unlock the Dream Land stage of the past, beat Target Test with all characters, regular and hidden.
Stage Unlock: Final Destination Stage
To unlock the Final Destination stage, you must complete all 51 Event Matches.
Stage Unlock: Flat Zone Stage
To unlock the Flat Zone stage, you must complete 1-P Classic mode at any difficulty/stock with Mr. Game & Watch.
Stage Unlock: Fourside Stage
To unlock the Fourside stage, you must play at least 100 matches in VS. mode (without quitting).
Stage Unlock: Kongo Jungle Stage
To unlock the Kongo Jungle from the N64 version of this game, complete the 15-Minute Melee. I'd recommend using Donkey Kong and constantly use his Down + B move the entire time (thanks to DEngel's Secrets guide, for I used that strategy to unlock this)
Stage Unlock: Mushroom Kingdom II Stage
To unlock the Mushroom Kingdom II stage, which is from Super Mario Bros. 2 on the NES, simply collect a Birdo trophy. The trophy is random, but when you find/win it, you get this stage.
Stage Unlock: Poké Floats Stage
To unlock the Poké Floats stage, you must play at least 200 matches in VS. mode (without quitting).
To unlock the original Yoshi's Island stage from the N64 version of the game, use Yoshi and hit over 1,350 ft. (400m in the JP version) in the Home-Run Contest. To do such, stand next to the Sandbag and TAP the X or Y buttons to jump, then use the Down + A move to hit the bag for around 30% damage each time. Do that about 4 times to get the bag up to around 100-110% damage. Since you won't have much time left, get the bat and use a Smash hit to send the bag flying. If you did it all well enough, you should make it well over the required distance.
Unlock every stage except for Battlefield, Final Destination, Dream Land N64, Yoshi's Island N64, and Kongo Jungle N64. This option appears in Additional Rules under Custom Rules in VS mode and allows you to exclude stages you don't want to go to when you use the Random stage select option.
To unlock Dr. Mario, you must complete 1-P Classic Mode using Mario at any difficulty/stock and without continuing.
Character Unlock: Falco
To unlock Falco, you must complete the 100-Man Melee mode. Defeat Falco after you complete that, and you can play as him.
Character Unlock: Ganondorf
To unlock the evil Ganondorf, complete Event 29. You will then be challenged by Ganondorf; defeat him and you can play as him from then on.
Character Unlock: Jigglypuff
To unlock Jigglypuff, simply complete the game in 1-P Mode at any difficulty/stock (Adventure or Classic).
Character Unlock: Luigi
To unlock Luigi, in Adventure Mode, complete the stage with a 2 in the seconds meter (03:12:43 for example). You'll then view a scene where Luigi comes and kicks Mario away so he can fight you with Peach. Defeat them both, finish the game. Defeat luigi
Character Unlock: Marth
To unlock Marth from the Fire Emblem series, play Classic mode with all 14 regular characters (not ones you've unlocked). Marth will then challenge you; beat him to gain him as a selectable character.
Character Unlock: Marth - method 2
Alternatively, you can simply use every character as a human player in VS. Mode, and get a challenge from Marth that way.
Character Unlock: Mewtwo
To unlock Mewtwo, play in VS. Mode for either 20 hours (Combined VS. Play Time total), or play 700 matches in that mode. After either requirement is met, Mewtwo will challenge you; beat him.
Character Unlock: Mr. Game & Watch
To unlock Mr. Game & Watch, you must complete both Classic or Adventure 1-P mode or the Target Test with ALL characters at any difficulty/stock, regular and hidden (that includes Mewtwo). After you do that, you'll be challenged; win this battle.
Character Unlock: Pichu
To unlock Pichu, complete Event 37 (Legendary Pokémon). Pichu will challenge you; win and you'll be able to play as Pichu!
Character Unlock: Roy
To unlock Roy, also from the Fire Emblem series, complete Classic Mode using Marth at any difficulty/stock. Roy will challenge you; defeat him and you can play as him.
Character Unlock: Young Link
To unlock Young Link, complete Classic mode with 10 different characters at any difficulty/stock. You'll then be challenged by Young Link; defeat him.