You must first play a one player game, and loose. You should then get the Ultimate Kombat Kode screen which has 10 digits for you to enter. You must have two controllers to enter the code. One Controller/Player 1's side press the High Punch button 1 time, the Block button 9 times, and the High Kick button 2 times. Then on Controller 2/Player 2's side press High Punch, Low Punch, and Block all 2 times, Low Kick 3 times, and finally High Kick 4 times. The code will look like:
MK-Dragon-Skull-Dragon-YinYang-YinYing-YinYang-YingYang-3-?
The numbered sequence of that code is: 1090222234
After you enter that code, either let the timer run down, or hold the Run button to make it count down faster, and you should get Smoke.

Ummm...What button is Block All?

I have the X-Box version and I tried that code with two controllers plugged in and it didn't work. Can you tell me what buttons to mash? Like X,B,L1,R1,BB(Black Button),WB(White Button), left right, etc? Thanx and sorry about this but I haven't played my X-Box in a while and they didn't have MAT2 on PS2 so I had no choice. lol

Xbox version controller 1 press X once, Y 2 times, Block 9 times
controller 2, press X 2 times, Y 4 times, A 2 times, B 3 times, and Block 2 times. I have it memorized now