Are you familiar with games like Guitar Hero or Dance Dance Revolution? The band practice, or Studio Game, on Music Star is similar to that. You have to wait until each of the individual black boxes reaches the center of the arrow (get it as close as you can), then press the correct button to clear it. If I remember correctly, the top row boxes correspond with the A button on the Tamagotchi, the middle row does so with the B button, and the bottom row means to press the C button. That may be backwards, but if it is, then you'll soon figure it out (sorry if it is). The game is a bit hard, and if you make too many errors (it doesn't allow you to make many), then you'll fail at it.
Once you've cleared the song once, you have to clear it again while playing with your other band member. Every time you win the game (after playing it both times), your band releases a new CD, and their ranking on the charts improves (which can be seen from the clock screen). The higher your ranking, the more money your band makes for each concert, and if you're ranked #1 on the charts, you can play a performance and win a trophy.