As a fighting game,
Fighter Maker 2 is probably a bit lackluster. The demo characters that come with it are not the most well developed characters around, and there's not a well developed background. This is understandable, however, as the whole idea is for you to create your own fighters. Using these demo fighters as a basis, you can change their appearance, their stance, moves, combos - you name it!
The appearance of the characters is determined in a matter similar to any other game with a 'Create-A-Character' feature; you choose from a set number of faces, hair types, shirts, pants, etc. and you can alter their color as you see fit. There are, of course, a few 'out there' parts to choose from, such as a Christmas outfit and tiger paw hands and feet.
The moves allow for much more tweaking. You use the predefined martial arts styles that are available, modify them to whatever degree pleases you, or create your own styles completely from scratch. This is all via an editor that has a timeline system for laying out a move with fully positional body parts (head, neck, chest, right shoulder, right upper arm, right elbow, right hand, etc.) - allowing you to precisely position your characters into the pose you want. The software will fill in any motion in between 'key frames' where you specifically design a pose. This allows you to only create the key poses, where there's a change in momentum - greatly reducing your work. The finished product is a fighting game that you can play with your friends, but more importantly, that you can brag about. If there is a special move or combo that you dreamed up that you've never seen done, this is your chance to make it a reality.