it's a macro pad. The four perimeter buttons SM1,SM2,SM3,SM4 execute the various projectile and other special attacks. The cartridges preload these moves. At least one move is similar for each of the characters on a cartridge. There are four buttons even though no character has four special moves because some moves are different. Presumably if you push a button for a Stryker-only move while playing Kabal he'll just look like he's spazzing out
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Shit...Good stuff there.
EDIT:Found this may have to pick it up...
http://cgi.ebay.com/Mortal-Kombat-III-3-Control-Pad-with-Cartridge_W0QQitemZ380008631730QQihZ025QQcategoryZ3642QQrdZ1QQssPageNameZWD1VQQcmdZViewItem