Do exactly what it says on the tin. Remember the following:
1. If one person misses a note and/or overstrikes they will lose the multiplier.
2. Both must activate star power at the same time for it to be released. You can hold the BACK/SELECT button and wait for your partner to do the same.
You do NOT need to complete any of the bonus songs (blue setlist), to get it just the normal setlist (yellow).
Remember that one person can select different diffiulties. But both players must be at least Medium. Since there are different difficulties there are no specific cutoffs, simply aim for a average multiplier of 3 and you should be able to get it.
As far as I am aware this can ONLY BE DONE LOCALLY and not on Xbox Live.