Two players compete against each other with the same choice of characters as in the Arcade mode (unlocked characters will be available here as well). You can set your character's strength by increasing or decreasing the life bar to ensure an even match.
The winner stays on to await a new challenger, making Vs Mode a great way of playing Tekken 3 in a group. . . Avoid stabbing the Tekken Whizz in the back while you're waiting for your turn though!