You meet him on your way to tabuu.
I think that after you unlock Mr.Game and Watch you have to unlock toon link or maybe R.O.B I Forgot.....
Unlock all characters except mr game and watch then use mewtwo in classic mode and defeat master hand and then defeat mr game and watch to unlock him or use all the characters exept mr game and watch to do target test you must smash all the targets for each character then defeat mr game and watch or play 1000 matches in melee mode and then defeat mr game and watch.
Beat Classic, Adventure, or Target Test with all charcaters to unlock Mr. Game and Watch.
Clear target test with ALL (Including secret) characters except Mr. Game and watch of course.
Mr Game and Watch can be unlocked one of three different ways: In Vs Mode play for a combined total of 1,000 matches once the last one is completed Mr Game and Watch will fight you defeat him to unlock him, Finish Target Test with the 24 characters which includes Sheik to make Mr Game and Watch fight you again you must defeat him to unlock him, Finish Classic Mode with Mewtwo and Mr Game and Watch will appear once again you must defeat him to unlock him however if you lose you can complete Classic again with anyone else to make him appear again.
play 1000 matches in melee mode and then defeat mr game and watch, use all characters except mr game and watch in target test and break all 10 targets for each character and then defeat mr game and watch, use mewtwo after unlocking every other character except mr game and watch in classic mode then defeat mr game and watch.
Either fight in 250 brawls or unlock him in the Subspace Emmisary. (For more info, go to www.smashbros.com)
To unlock him in melee clear target test with the first 24 fighters.To unlock him in brawl clear target test with 30 characters
Finish the Halberd Bridge Area in the Subspace Emissary to unlock Mr Game and Watch.
Mr. Game & Watch should be the last character you unlock in Melee (unless you unlock the secret characters out of order).To unlock Mr. Game & Watch:Play 1,000 vs. matches (that's whole lot of playing)The easiest way is to play all the characters (including the secret characters you already have) in Classic Mode or Adventure Mode.Once you beat Mr. Game & Watch after you do either one, you unlock All-Star Mode, where you must beat all regular and secret characters with only 3 hearts to win.
In melee play 1,000 melees, finish target test with the 24 characters or beat classic mode with mewtwo then defeat mr game and watch to unlock him. In Brawl play 400 brawls or beat the subspace emissary if you choose the brawls you must defeat mr game and watch to unlock him.
play 1000 vs matches to unlock character 25, Mr. Game and Watch. There are no characters after that.