The concept of this game is to make your character dance in a better manner than your opponent does. To make your character dance, you press a combination of the d-pad and one of the four buttons on the controller.
In doing so, your person will do a move that lasts for four beats of the song. The quicker the beat of the song, the faster your character does their move. After the move, you again have to press a combination of d-pad and button to launch your character into another move.
After you finish a dance in Free Mode or Trace Mode (or if you just press Start during the match) you have the option of changing the CD. When you select this you'll see the words "Please Set Music CD". This is when you put in the CD of your choice.
Dancing Mode: Free Mode, Trace Mode, Practice Mode, Challenge Mode