I'm going to make two guesses right here, guys. My first guess is that whichever character you choose to save will then become playable in an Adventure Mode. Then, you use either that character or another unlocked one to go through the Adventure Mode and save the other princess from Petey.
Or...
Petey devours the princess you don't save, and then you team up with a computer-controlled Peach/Zelda and Kirby/Mario to weaken Petey enough to make him burp her up. Then you'll probably either earn those two as playable characters or have to face them on their home stage at the same time (or separately) to unlock them.
I'd also like to say that I am unaffected by the appearance of Petey Piranha, but am slightly unnerved by the appearance of Pokémon Trainer as a character and rather angry that Diddy Kong, out of all other possible characters in the game, is going to be playable.