Mugen is a 2D fighting engine developed by elecbyte. Elecbyte has, in recent times, openly stated that they are scraping this version of mugen, however, there is no real proof of this.

The standard mugen can be downloaded here:
http://unofficial-winmugen.jpn.org/

There are many sites for Mugen characters, but for the most basic, go here.
http://randomselect.piiym-net.com/
http://www.mugenguild.com/
http://www.mugenation.com/
http://www.mugen-infantry.net/
http://www.mugenhistory.com/
http://www.mugenfury.com/?lang=en
http://infinitymugenteam.com/
http://ngmc.retrogames.com/
http://gcnmario.free.fr/

To learn how to add characters and stages to mugen, go here:
http://www.mugenfury.com/tutorials/aides/help.htm