Play as Heihachi Mishima:

Beat arcade mode with ALL selectable characters.

Unlock Every Charcter:

At the main menu, hold A + B and then press Left, Right, Right, Left, Left, Up, Up, Right; all characters should now be unlocked.

Team Battle Mode:

Unlock Heihachi by beating the game with ALL selectable characters, then beat Arcade Mode with Heihachi to unlock Team Battle Mode.