Go to Junon there will be 12 soilders hidden randomly across the level.Find all 12 of them and then go to the Gold Saucer. Find a man chasing several children.
Talk to him and he will ask you if you want to be Sephiroth.You have the have the choice of being him now or later.
Choose now because he will disappear (the guy chasing the children)at the end of disk 2 sephiroth will act on his own in battle.
I have a question how do you get the key that redXII granpa ask for to the city of the ancients.