He was a hidden character only on the Playstation Trilogy. He was a male ninja who had the moves of all the other male ninjas. He has no story, no ending and he doesn't even have his own color. He's nobody.
Khameleon was a similar character only on N64 Trilogy. She had all the moves of the female ninjas. She wore gray and her story was she was a member of Reptile's race who was trying to warn him Shao Kahn killed their people.
Actually, Chameleon was in the PC version of MKT as well. If you want to play as him, just pick one of the ninjas and hold HP+LP until the fight starts. Then your ninja character will turn into Chameleon.
He doesn't have any story, his color and moves changes every few seconds to one of the 6 ninjas', but he has a nice transparent appearance and what's interesting, the announcer pronounces this hidden character's name.
Chameleon was in all the disk versions, I think N64 was the only one without him. N64 had it's own exclusive version.
I happen to like chameleon, how he is. A story and background could just ruin him. I hope that he does remain a mystery though. That makes him just that much more interesting.