If you want to develop your own character instead of downloading one:
Under the [Characters] section, type the name of the folder you just moved (e.g., Gon or Ryu ) and save the file. Creating Your Own Avatar MUGEN Avatar Free Download
Copy the extracted folder into the chars directory of your M.U.G.E.N installation. If you want to develop your own character
The original developer's site, which provides the engine and base documentation. MUGEN Avatar Free Download