The sole reason why Xbox Live Arcade exists.
Seriously, I forgot how terribly cheap the AI for this game was until I sat back down with it on the 360. I know that supposedly makes it easier to beat, but when the AI counters my moves before I even know what move I'm making, it gets a little frustrating.
What I'm getting at is that there's no fun to this arcade-accurate port of UMK3 in single player. Forget it. There's a handful of Achievements you can easily get in single player (beating the Tournament ain't one of 'em), and that about does it for "arcade mode".
What you want, what makes this game so much fun and worth the $10 entry fee, is the multiplayer. UMK3 truly has a very engaging, robust fighting engine. When you put two humans at the controls, instead of an all-knowing AI, you see this game truly shine. Now, that's all well and good if you have friends to play against, but you friendless basement dwellers are in luck too.
The Xbox Live multiplayer in this game is great. It's very smooth, very easy to get going, and the competition seems to be pretty solid. The sprinkling of Achievements for ranked matches and multiplayer feats is certainly nice too.
If you're looking for a single-player fighter with a deep story mode and engaging single-player experience, keep lookin'. If you're interested in a cheap competitive arcade-style fighter, this is it.