First is requires you to be able to edit a screen pack. Once you can do this you need to make more rows of boxes so that some of them are off the screen then you put your mugen characters into these boxes and they will be "secret".
How to Make Secret Characters:
1) in your Mugen folder open data/system.def
2) scroll down to the Select info:
3) You can edit the number of colums and rows to your liking, you can also edit the size of the select boxes and the position on the screen.
[Select Info]
fadein.time = 10
fadeout.time = 10
rows = 10
columns = 6wrapping = 1
pos = 21,14
4) This is what you basically want to achieve.
D-Day