Spoiler-Free:
Unlocks after completing the game on Normal or higher difficulty--on the final cutscene before the epilogue.
Normal difficulty is the standard setting for the game--enemies will give you plenty of warning before they attack so you'll have obvious visual cues for when to counter attacks. Also the health system is fairly forgiving--earn xp to regain health--defeat enemies and RECOVER RIDDLER TROPHIES to gain xp.
It is recommended to start off the game on Normal Difficulty.