All Characters
This unlocks all but Hyuuga Hanabi and 4th Hokage Yondaime. At the main menu: hold R1 and R2 together, then press Square, Triangle, Square, Triangle. Then, press and hold L1 and L2 together, and enter Right, Up, Right, Up. Press L3 and R3 together. You should hear a soud.

More Characters
Anbu Kakashi - Finish Ultimate Road
Anko Mitarashi - Finish her in Ultimate Road
Asuma Sarutobi - Finish him in Ultimate Road
Hanabi Hyuuga - Date her in Ultimate Road
Kurenai Yuhi - Finish her in Ultimate Road
Taijutsu Naruto - Finish Ultimate Road

Clearing the chapter missions below unlocks the character:
Gaara - Chapter 2, Mission 7
Haku - Chapter 1, Mission 2
Hoshigaki Kisame - Chapter 3, Mission 8
Jiraiya - Chapter 3, Mission 9
Kankuro - Chapter 2, Mission 7
Momochi Zabuza - Chapter 1, Mission 3
Orochimaru - Chapter 2, Mission 6
Sandaime - Chapter 2, Mission 6
Shizune - Chapter 3, Mission 11
Temari - Chapter 2, Mission 7
Tsunade - Chapter 3, Mission 11
Uchiha Itachi - Chapter 3, Mission 9
Yakushi Kabuto - Chapter 3, Mission 10

Multi-Player Characters
In Vs. mode: hold Select button while you choose the normal character listed on the right, to get their special version on the left.

Butterfly Chouji - Chouji
Drunken style Lee - Lee
CS2 Jiroubou - Jiroubou
CS2 Kidoumaru - Kidoumaru
CS2 Kimimaro - Kimimaro
One-Tailed Naruto - Naruto
CS2 Sakon - Sakon
CS2 Sasuke - Sasuke
Shukaku Gaara (normal-sized) - Gaara
CS2 Tayuya - Tayuya