Complete all 100 in-game Challenges. Alternately, you can download him from Capcom's website.
Mega Man S
You can download Mega Man S (with his slide ability), by beating all of the stages on Easy.
Complete Normal Mode in New Style.
Boss Title Screen
Defeat any boss with mega buster. After you're done, just load them as character.
Charge Shot & Sliding
Finish all of the stages on normal.
Download from Capcom's website.
Beat him in new-style mode using only the Mega/Rock Buster.
Finish the game on Hard Mode