The setting of the Street Fighter, King of Fighters, and Fatal Fury (and Darkstalkers, although it's less of an issue there anyway) games have a few implicit things going on that are different than our world. I don't just mean the fact that there are superhero martial artists running around with superpowers, although that's clearly one thing; I'm talking more about the more implicit stuff that you don't really think about until you stop and ask yourself some interesting questions.
For one thing; why do so many Asian characters look European in their physical features? I'm not necessarily talking about the way Ryu is animated (although especially in the Alpha series, he doesn't look Asian at all) but rather characters like, for instance, Karin Kanzuki. She has a very normal Japanese name, and is supposedly the scion of a Japanese household that runs a big-time zaibatsu and has its own personal ninja army. Yet she has incredibly white features, including curly blonde hair. Sure, sure, it could be dyed, but the fact is, that her features don't look at all Asian. Is she adopted? Or maybe, in the world of Street Fighter, people can just look like whatever, no matter where they're from. Especially if they can look more white, which seems to be the only way that this normally goes. You see this kind of phenotypic cosmopolitanism everywhere, though--even in the many of the background characters and extras.
Also; why in the world are there these martial arts tournaments where supervillains are always trying to take over the world? Where all kinds of people, including unaccompanied minors, travel the globe without any apparent concern? Are there not effective governments in the world of karate supers? It seems not; after all, Southtown operates more like an independent city-state than a city in a state in the United States, and Metro City basically is the domain of lawless warlords. Even Mike Hagger and Cody as mayors act little different than warlords, if you think about it. Governments can be a convenient plot device on occasion, especially if some kind of military is needed, but even these mililtaries seem more like the protection arms of warlords occasionally extended to project a little force rather than actual militaries of actual countries with functioning, efficient federal governments. The world of karate supers is one where only local governments seem to have any real impact, and even then, they are usually pretty laisez-faire compared to how any local governments operate in the real world. Which is fine. Actually, it's ideal. I wish the real world were more like that. Does anyone really want more government than we have? (I'd take a more effective government that actually cares about the good of the citizens that it is supposed to govern as a consolation prize, but whatever. We get neither in the real world, sadly.)
Why doesn't anyone use weapons? About the only time I recall anyone shooting a gun in a Street Fighter game was when one of the dolls; Fevrier, I think, shoots one at Birdie, but be blocks it. He has a chain wrapped around his arm, so I guess that was kind of a fig leaf towards explaining it, but mostly I think it's because guns would just screw up the concept of martial arts superheroes fighting with their fists. So, they're just handwaved away as a non-concern. Plus, they're superheroes. Why can't they mostly block bullets if they need to? When's the last time guns played a prominent role in Spider-man, for instance? Guns can be a plot device, I suppose, if you need them to, but guns fundamentally belong to a more realistic, gritty world than the bright and polite four color world of karate supers, really. (As an aside, in the SNK world, Whip has a gun with her super combos and a few minor regular attacks. It's not any more devastating than a minor fireball, though.)
Many of these odd constructions implicit in the setting mimic the implicit constructions inherent in American superhero comic books too, as I've said. For a Western audience thinking about how this would all work, thinking about comic books and thinking of this as the same kind of setting makes it all work.
Another odd thing that I've noticed is that there's an unusually Japanese perception of American settings and characters too. Guile is the quintessential American from the point of view of the Japanese, because that's their primary exposure to Americans, or at least it had been for many years--soldiers on the bases in Okinawa and elsewhere in Japan. Metro City, while fictional, has a Statue of Liberty, so it's obviously actually New York. The perception of NYC actually being more run by orgnanized crime than anything else is something that they probably got from Hollywood. SNK is even more unusual; Southtown is supposedly located somewhere in Florida, it looks like, from its placement on the big map in the Fatal Fury games (although those are quite stylized and can't be taken too literally.) However, almost everything about it looks more like Honolulu. This seems odd until you think about the fact that Japanese are the single largest plurality ethnic group in Hawaii, and Honolulu is probably a relatively common destination for vacationers from Japan. It makes sense that an ethnocentric population like the Japanese making a video game set in America would simply assume that any coastal city in America would look like the coastal city that they're most familiar with. Even though Florida obviously isn't surrounded by green mountains covered in rain forests. It's probably best to focus, as much as possible, on locations that are fictional, and make them kind of "Ruritanian" cities in America rather than real ones.