I watched a lot of the 90s X-Men series when I was younger, but I barely remember any of the villains that showed up in it not named Magneto at this point.
Omega Red started off as a Russian serial killer called Arkady Rossovich. He was then captured to be turned into the mutant Omega Red.
In this game, he uses carbonadium tentacles to give him a long range. They count as a command grab. You can toss foes this way, or while it's latched onto them, mash the Punch buttons to drain your opponent's health, or mash the kick buttons to drain their Super Meter. Since Juggernaut takes more damage from throws, this is a very good thing for Omega Red to have.
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After beating Magneto, it was because he was getting in Red's way of finding a device called the Carbonadium Synthesizer. Magneto doesn't know what that is, so Red just leaves him to die on the exploding Avalon, but even eventually finds that Carbonadium Synthesizer, anyway.
So now Omega Red plans a world conquest, taking out some police cops in his way. Then Cyclops drops in to fight him.