I believe they are just seen as the average computer, and that they aren't exactly amazing at responding to you but are good enough to get out of most things you could do to lower level CPUs. As for practicing against them, I hear that you aren't supposed to play them like you would a normal person. When you play them, practice spacing and important things like that which is able to be practiced without much affect from the CPUs.
If you really need to work on making your moves connect, set them up to be in human like situations. For example, one may knock the CPU in the air and attempt a fastfalled Uair (hitting with the very edge or tip of the hitbox), seeing as in a real human match the person might be fastfalling and you would therefore actually hit them.
And if you have friends, the best route is to play against them instead of CPUs, because the human player will almost always be more beneficiary to your playstyle then a lowly CPU. (Unless the person is truly VERY bad, and you don't really have to try to win)