I'm not a Melee player, but the concept of reading is pretty universal, so I think I might be able to offer some insight.
Reading consists of three basic facets:
-Recognition of opponent's options
-Recognition of your own actions in response to aforementioned options
-Modeling of your opponent's competence
For one and two, it's as (theoretically) simple as considering what your opponent's options are in a given situation and how they will likely respond to a given situation given how competent you feel that they are. The hard part is adapting to your opponent's competence level, learning MU specific reads and acquiring a talent for quickly calculating each possibility and choosing the most appropriate option in that context (for instance, an ostensibly "dumb" move, such as an obvious choice that could easily be read, may sometimes be the smart choice if made for the reasons [such as your opponent be ingenious enough to know it's stupid enough to work against a fellow competent player])
For an example on the modes of player competence, I was just playing my brother in SSFIV. He's new to fighting games (competitively) and his grasp on reads, prediction, conditioning and the like are pretty shallow. With that in mind, I know that he'll make knee-jerk movements, like instinctively doing wake-up attacks, and getting nervous when I pressure him, so he jumps in a lot. Were he an expert, he'd probably make less obvious choices, or even sometimes deliberately make dumb choices to throw me off of my game because I didn't think he'd take such a risk, which would necessitate a change in plan of action for me.
So, everything I said can be said in brevity:
-Understand your opponent's options
-Keep track of what you've done against your opponent thus far, as no given movement or option is inherently dumb or smart, but is made so by context
-Consciously practice thinking about what a person would do in a variety of mental states and in a variety of situations. I'm a Ganon main in Brawl, so when I land a Side-B (which we lovingly invoke as the Gerudo choke
) people usually panic because it sets them up for a read, so they make reactions that one would make instinctively, which makes for an easier read. A person who's calm, a person who is frustrated and a person who is incompetent will all make potentially different decisions. So you have to gauge your opponent's state of mind, competence level and what you've done thus far that would condition him/her to believe you're going to choose a specific option, so that they will act in accordance with their potentially mistaken prediction, and you can punish them for it.
It all sounds terribly complicated, but it's something that comes with practice. Like lifting weights or playing an instrument, your muscles and fingers feel as if the weight and speed of their respective tasks is just too great to accomplish or even imagine, but after time, it just simply becomes possible. Your mind has a brilliant way of ameliorating itself without you even knowing it. It just, again, requires conscience practice and <thought>, even if that thought isn't while playing a match. Reading is an art; not a science. So it takes practice, experience and application. If someone's a tough piece'a meat, and they make a habit of seeming to avoid every read, it's because you're going for too many hard reads; sometimes you gotta soften 'em up a bit. Sometimes non-action is the best action, and sometimes, you've gotta aim to miss, if that makes any sense; not everyone's gonna sell their habits, so you've gotta tenderize them a bit (hopefully you're able to follow my written acrobatics lol).
