Theatrhythm is a name that's difficult to spell, which I've only succeeded in spelling after trying multiple tries. It's the name of Square Enix's new Final Fantasy-themed RPG title/rhythm game for the 3DS.
Little is yet known about the game's rhythm system, but from what Square Enix has revealed, players will be able to select a game, from Final Fantasy 1 to XIII, each of which is split into three stages: field, battle, and event. Each stage offers a different gameplay system, and players can additionally select what difficulty to play on.
Designed for a party of four characters, players choose from a variety of Final Fantasy characters, which appear as super deformed Chibi styled characters to fill their party's ranks.
Characters will level up each time the player successfully completes a stage, and moves onto the next one. However, as Andriasang notes, Square Enix has not clarified what it means to "level up" in this game. Players will however unlock movies and songs as they go through the game.
Music to feature in Theatrhythm includes One Winged Angel, and a variety of music from other Final Fantasy games.
Source: Andriasang