When opening up the engine and pressing Enter on the "Arcade" option, you will be greeted to a screen like this. The engine is generous enough to give you a sample character to work with. But you want to play as Mario, don't you?
You have two choices. Either you create your own character (have fun), or you download one from the Interwebz.
The former requires a little effort, so if you just need a quick drug, download.
The downloaded character usually comes in a .rar or .zip file. Extract the contents into the "chars" folder. More infos below.
If there is a folder within the .rar named after the character, extract it to the folder.
There isn't always a folder within the .rar. Sometimes the contents are scattered about. In this case, create a new folder in "chars" named after the .def file in the .rar and extract the necessary contents into that.