The Official Twitter account for ARMS has tweeted a little nugget about the game as to why the characters wear masks. It turns out that the masks they wear is what helps maintain the extendability of their arms (or hair in Twintelle’s case). This of course doesn’t apply to Mechanica as her robotic shell is what has extendable arms and Byte & Bark are robots.
Though it didn’t really need to be exlained, it is nice that the developers have added a bit of trivia to the game and given it a bit more depth to the story, not that everyone was racking their brains as to how the characters can extend their arms but anyway, if there is anyone trying to work out how the ARMS fighters maintain their extendable arms, you can now sleep easy at night again.
Source: Arms Official Twitter Page