Beat the game with each of the four characters in Normal or Hard mode. After that, a new character, Aria/Iria will be available for you to play in Story mode.
Unlocking More Characters In Duel Mode: To unlock characters in Duel mode you must beat the game with at least one character on any difficulty. After that you get the option to save. Save the game and then the next time you start a Duel game, you will find that most of the monsters you encountered previously will be characters that you can use in Duel mode!