Your fight takes place around the fountain in the center. Like stages such as Delfino Plaza, this stage travels through seven areas(appearing in this order:Aqua Garden, Crystal Castle, Delight City, Lost Park, Memory Forest, Pure Valley and Wizeman's lair where Wizeman himself makes an appearance. Don't worry, he's just for show). As you pass through the areas, you will find rings, pass through these rings by jumping through them. When ten of these rings have been passed through, a blue chest appears in the center of the arena. Open it to reveal an item(no Smash Balls, Dragoon Parts, Hydra Parts or Assist Trophies). Watch out though, as some of these rings are fake and will hurt any fighter who passes through them.
Once in a while, you'll see a NiGHTS Capture(the cage that Reala keeps imprisoning NiGHTS in). If you hit the cage, you'll be trapped inside and carried away towards a KO. If you touch the chain, you get hurt.