I'm think it's how many wins in a row versus the cpu in arcade mode. The harder the tier level you choose equals more opponents equals higher score. Just a guess.
That whole scoring system is a crap-shoot. They use a different method for each of the different gameplay modes... and none of them make sense. The worst one is Versus Challenger, where EVERYONE has a score of 100. So everyone is tied for first. It's makes zero sense. The Versus mode is retarded, too. You'll see people that have a 0-19 W/L and they're 10th on the list, then there's people that are 59-0 that are 180th.
The scoring system makes as much sense as the constant locking-up and the relocking Ermac/Sub-zero/Mileena problem.