Marion, Willie and Elsa are each in different stories. Use two controllers, make sure nothing's in the way (chairs, people, etc.), use Indy and face her, and press B to throw the whip at her. It should wrap around the ladies' waists and pull them close.
This MUST be done on Story Mode, as I learned through much hassle that it would not work in Free Play. (Edit: Some players have reported it unlocking during Free Play, but I spent like an hour trying. Maybe I was doing it wrong, but if you're having trouble unlocking it, try it again in Story Mode.)
There are nice slow scenes to do this at the beginning of the following missions:
Marion: Raiders, 2nd mission ("Into the Mountains")
Willie: Temple of Doom, 2nd mission ("Pankot Secrets")
Elsa: Last Crusade, 1st mission ("The Hunt for Sir Richard")