Earlier today, it was reported that Killer Instinct for the Xbox One would be completely free-to-play, thus putting a rather large, nasty elephant in the room of an otherwise positive prospect. But it appears as if Double Helix Games has set the record straight at a showfloor event.
In fact, the game will actually launch with a demo with one playable character, and allow you to purchase the entire game as normal -- like you would with any full retail release, in addition to character packs (similar to DLC or costume DLC in any current fighting game).
In my eyes, this actually seems like a feature in the form of an enhanced demo, allowing you to play at least one character with your friends in a full retail game, before you purchase the full game.