As in the first Budokai, each character is able to be customized by using a 7-slot skill tray. Players may choose up to 7 skills and give them to a fighter. Skills can take from one to seven slots. There are three types of skills, Special Moves which includes skills such as the Kamehameha and Super Saiyan, Physical which includes such skills as Super Dragon Fist and Zanku Fist, and Equipment which includes skills such as Senzu Bean. Breakthrough allows all attacks both physical and special moves but no equipment.
Story mode in Budokai 2 consists of a board game-like adventure called Dragon World. In this mode, you play as Goku and along with one or more allies, travel around the 9 different levels. Along the way you defeat enemies and collect items such as money, capsules or Dragon Balls. After you complete the game, if you have collected all seven Dragon Balls, you are able to make a "wish" which lets you choose one from three special capsules, which include Breakthrough capsules (these allow a player to use all of a character's moves and abilities at once), Fusion capsules, and Bulma costumes.
The World Tournament allows players to compete against the computer or up to 8 players in a Martial Arts Tournament. If more than one human player is present no prize money is available, but with only one human player the following prizes can be won:
If a player reaches second place, he/she will win half the prize money.
The capsule system was an empty tray that you'd fill with capsules before each fight. Capsules included projectile beam moves (Kamehameha, Masenko, Gallick Gun), super finshers and transformations (Kaio Ken times ten, Super Saiyan, Perfect Cell), but there were also support capsules, like perks, like a Senzu Bean that'd restore your health, or "Saiyan Pride" that would make your attacks do more damage for the first 20 seconds of the fight.
Some capsule moves had drastic effects that wouldn't fit into a regular balanced fighting game, like Captain Ginyu's Body Change that would swap characters- character models, move lists, health bars- if you landed this combo, "Mecha Frieza" that would let you COME BACK AFTER K.O in a new skin if you're playing as Frieza, Fuse Tien with Yamcha mid-fight for a unique move list and added ATTACK damage, Fuse Buu with Gohan, become Gogeta and so on. Powerful capsules like these ones would take up 3 or 5 or even all your slots, so you'd be sacrificing choice.
Certain capsules are limited to specific types of characters, like ONLY SAIYANS or ONLY ANDROIDS. Every character has a handful of moves that only they can do, and you can stack some moves, like having Kamehameha twice to have it do double damage. Obviously this would take up 2 slots instead of one.
There are more than a hundred capsules to collect, all with different scenes, buffs and transformations. Some are common and don't make a huge impact on your character, others are very rare to see, like Android 16's ultimate suicide technique that would end the match in a draw. You collect them by earning money in the campaign, and spending them at the Capsule Store. The store would be a random roll of 10 capsules every time you entered, so there was some luck to going to the store and seeing a rare one. You COULD buy this stuff you've been after, but you're never gonna see BECOME MAJIN VEGETA in there again, so there can be unexpected changes of plan. Some capsules were so rare that you had to collect all seven dragonballs in-game and wish for them. These were often new characters, or fusion techniques.
This Game was well recieved by fans of the Manga and Anime although many critics criticized the Story Mode Gameplay as a bad take on a simple Board Game design and that some of the fighting mechanics stayed the same as they were in the previous Game and thought that it left the Game short and not really worth picking up after the second or third play, they also praised the improved cel-shaded visuals from the first Budokai.
There is a total of 31 playable characters on the roster compared to 23 on the original game, ten of the characters are brand new to the series. Android 19 and Kid Gohan are the only characters not to carry over from the original into this game.