It's true, Jake is infuriatingly good at fighting games. He does bring up a good point though. When you hear someone screaming at the top of their lungs that they are the best there has ever been, chances are you won't have any trouble beating the pants off of them. It seems that a lot of people have a terrible gauge as to where they stand in fighting games.
The reason for this is simple. In an FPS or RTS, it's very easy to know how good or bad you are: simply play online with real people and see how well you do. Until recently, there hasn't been any way to play fighting games with people who aren't sitting next to you in front of a console or arcade machine. Without a human playing against you, there is no way you can hope to be skilled enough to dominate in a competitive match.
Some newer and rereleased games such as Ultimate Mortal Kombat 3, Dead or Alive 4, Street Fighter II, and Street Fighter 3: Third Strike are playable on Xbox Live. I haven't tried Dead or Alive 4 or Mortal Kombat yet, but I can say that lag in a Street Fighter game is killer. At the beginning of last summer, I first got my hands on the Street Fighter Anniversary Collection for the Xbox. I had long owned it for the PS2, but the first time I jumped on Xbox Live with it I was literally shaking with excitement. After a good while of non-stop online play (several weeks worth), I put the game down and never played it on Live again. The problem is the Street Fighter series is very dependent on timing, and even a minuscule amount of lag can completely ruin any chance of parrying an attack. (For those of you who have never played Street Fighter 3 or beyond, pressing forward at the exact instant of attack stops the attack with no damage. See here and here.) Street Fighter II is not quite as bad (since there is no parrying), but playing it on Live can be quite irritating if you don't have a ridiculously low ping.
So without online play, how do you get good at fighting games? I've made a list of 10 things you can do to improve your game. For some of you these rules will be very obvious, but I would not have written it if I had not seen so many people guilty of each of these. Note that even though I wrote this with a Street Fighter or Guilty Gear-like game in mind, these simple rules should apply to most fighting games. So, here they are, from the most obvious to the least:
#1: Play against people. This is by far the most important thing you can do. Play against your friends, play against strangers. This is so obvious you are probably wondering why I put this in the list. The simple matter is, not many people do this, or if they do play against other people, they only play against a small group of friends. Without playing against lots of different people you will never know how good you are.
An important corollary to this is that you are only as good as the people you play against. If you can beat all of your buddies at Street Fighter, great, but you are never going to get any better unless you play people better than you are on a regular basis. For recently released games, the local arcade should be your best friend. I spent gobs of money playing Soul Caliber II when it first came out, and I got much better as a result. I quit when I couldn't find anyone better than me to play against. Just remember, if you are the best player you know of...that doesn't mean you can play at a tournament level. It just means you need to find better people to play against.
#2: Play against the AI. This is a crucial first step towards mastering a game since you cannot always play against a human. If possible, work your way up to the hardest difficulty and get good enough to beat it regularly. In some games this isn't possible, for example the AI in Street Fighter II cheats like crazy (on the highest setting, Chun Li can throw M. Bison out of a Psycho Crusher...which is impossible and wouldn't come up in a versus match). For for most games though, it at least gives you something to practice against.
Being able to beat the at the hardest difficulty AI does not mean that you will fare as well against a real player. I could beat the hardest AI in Street Fighter 3: Third Strike long before I could go toe to toe with Jake, and he still beats me a majority of the time. Use the AI to your benefit, but don't use it to judge your skill.
#3: Practice with multiple characters. It's just sad to watch someone pick Shotokan characters over and over, and still not be any good with them. It doesn't matter if [insert character] is the best in the game, you must play a variety of characters. In doing so you may not only find a character you like more, but you will also learn how the other characters work. This is how you will be able to counter common attacks and super moves. For example, if you are playing Third Strike and you don't know what Chun Li's third super is, you are going to be in for quite a surprise when you try to jump in for the first time.
#4: Learn combos, lots of them. Gamefaqs has a great collection of combos for most fighting games, and you can learn a lot from videos on YouTube. For example, searching for "Chun Li Third Strike" comes up with lots of interesting combo videos. Be careful with these videos though, as a lot of them show "trick" combos which can't reasonably be performed in an actual game. It's important to learn combos for the characters you pick, but it's equally important to know what common combos are for other characters so you are prepared for them.
#5 Learn to vary your playing style. It is crucial to know a variety of combos and openings for combos. A devastating combo for a character is useless if you try it over and over since people will know exactly what you are going to do. In addition to combos, you should learn how to vary opening attacks. For example, in Third Strike you should be able to start a combo with a jump-in attack, a jumping crossover attack, a ducking medium attack, and a hop attack at the minimum. Every character has other in Third Strike has special moves and regular attacks which are perfect for starting combos as well, and the only way you will learn them is to experiment with characters to see what each of them are capable of.
#6: Learn general game knowledge. Read gaming forums specific to your game of choice. Chances are if you don't know what kara throw is, you don't play Third Strike on a tournament level. Hell, if you don't know what the importance of a kara throw and are able to use them with regularity, you don't play on a tournament level at all. The exact same thing can be said about wave dashing in Smash Brothers Melee. Aside from sheer random accident, the only way to find out these things is to read faqs and forums where people post these tricks.
Over time you should also start to notice other common things about characters to watch out for. On the absolutely most basic level in, you should know that Remy, Alex, and Urien are charge characters, and you should start watching for certain attacks when the character is ducking or walking backwards. On the intermediate level you should watch for common openings to combos which can be tricky to parry, such as if you are standing directly next to either Chun Li or Ken in the neutral position you should always parry twice. This is because both characters have a two hit combo lead-in if they are standing close (for Chun Li it's back and medium punch or a neutral medium kick, and for Ken it's neutral medium punch followed by hard punch). On the advanced level you need to know how to parry super moves, including how many hits and what timing order they arrive in. Even if you aren't able to parry the entirety of a super move, for certain characters you can parry the last hit rather easily and immediately go into a combo before they can recover.
I realize this point was very Street Fighter specific, but the similar information for whatever game you are playing is very important to know. Another example would be the Soul Caliber series. You need to know the various attacks characters use, the stances they use and how that affects their actions, and so on. This is a lot of information you need to know, and the only way to know it is to play a lot of different characters against a lot of different characters, as well as keeping up with various faqs and forums.
#7 Practice multiple ways. When you can't play against a human, you can always practice against the AI. Playing against the AI as if it was a human opponent is a good thing. However, it is also important to practice techniques against the AI without worrying about winning or losing the match. In Street Fighter, parrying is a very important thing to learn how to do well (it is in Soul Caliber as well). Other fighting games have similar things, such as Just Defending and counters. The only way you will get good at these techniques is to practice it until you have it. Equally important things to practice are wake-ups, throws, dashes, and super combos. Being able to utilize all of the game mechanics to your advantage is the key to winning a match. To get better at these things, play against the computer with one of these things in mind. Throughout every match practice using one of those as often as you can until you learn when to use it (and when not to use it).
One last note, you should start practicing a combo on a stationary target to get it down (most games have a training mode for this reason). Once you have done this, you must practice on a live target (be it AI or human) or you simply won't be able to use it when you are actually playing to win.
#8 Practice against people. In addition to playing against people (that is, to win), also practice against people. When you sit down to play a match against someone, decide before you begin if you are going to play to win, or if you are going to play to practice. When I sit down to play with friends, there are some nights I only practice parrying or various wake-ups and combos, but end up losing many more matches than I usually do. This is a good thing, and it lets you try something with a human punishing wrong moves instead of the predictable AI.
#9 Learn to evaluate risk versus reward. Once you know all the ins and outs of a particular game, you can start making value judgments about what to do in a particular situation. For example, if you are playing Guilty Gear XX, and you are about to lose the match, why not try an instant kill? What do you have to lose if it misses? In Third Strike I can parry most fireball based super moves, but I can only do it successfully maybe 40% of the time. If I'm low on health and someone goes into a super move which will kill me on block damage alone, there is no reason to not try to parry it.
The most famous instance of this was Daigo's performance during a tournament. In this situation, it was 1 to 1 and he was about to lose the match when his opponent threw a super move which would kill him on block damage alone. The amazing thing is not just that he parried the entire super move, it's that he jumped to parry the last hit. This is a very dangerous thing to do in the situation, but he knew he needed a jumping combo to kill his opponent...a ground combo would not have sufficed. Risk versus reward.
Beyond extreme situations like these, it's also important to make these kinds of decisions on a smaller scale. When next to an opponent in Third Strike, should you try a ground attack to start a combo, a hop to start a combo, or a throw? If the opponent is waking up, should you try hitting him immediately before he can do anything about it, or should you try to parry the inevitable wake-up attack? In Soul Caliber when you are in a parry battle (where players are parrying back and forth), should you try to continue the status quo and hope they make a mistake, should you try to purposefully delay a fraction of a second in hopes they parry at the wrong time, or should you try a completely different attack with a strange parry timing? These are the things that you should start thinking about once you have a very good grasp on the game mechanics.
#10 Know your goals. You really need to understand what your goals are plan accordingly. If you are practicing to play at a tournament level, you need to find other tournament level players to practice against. You will need to be good at aspects of the game which you can practice alone (eg, kara throws and parrying in Third Strike), but that can never replace practice with a real opponent.
If you want to get better at arcade play, buy a joystick! I play the Soul Caliber series very well on a joystick because I play in the arcade. I cannot, under any circumstances, play Third Strike on a joystick. I've never found a Third Strike arcade machine, so I have no real interest in learning to play it on one.
Though this should be bleedingly obvious, if you want to play online better, you need to also practice online instead of playing to win. When playing online there is a big pressure to win. You shut off most of your active thought process and really focus only on the immediate situation. The problem with online games is that there is lag, and practicing offline alone does not entirely prepare you for the subtle change in timing when you transition to online play. Practicing online will certainly affect your win loss record, but you will get better as a result. On the other hand, if your entire goal is to increase your win loss ratio, you should clearly never play online without the express intent of winning. Instead you will have to do all of your practicing far, far away from Xbox Live.