From the Super Mario Wiki
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All the players are running in a race. All the players play one microgame, over four rounds, and if they win it then they earn points. The microgames in the first round is worth ten points, fifteen for the second, twenty for the third, and thirty in the final round. After that, the players are suspended by ropes and arranged into whatever order they finished in. The player who came first then chooses a rope to cut and then the next player does so until they reach the end of the queue. If a player's rope is cut completely they fall into the water below and are eliminated from the game. The winner is the last person standing. The number of ropes a player gets depends on what place they finished after all the microgames (1st is 3 ropes, 2nd is 2 ropes, and 3rd-5th is 1 rope)