Sonic 2's Hidden Palace Zone is a cut stage which has been retroduced to the game in recent re-releases.
Debuting in the remastered mobile versions of the game, unlike other stages which appear in sequence, Hidden Palace Zone can only be found by discovering a particular route.
The stage appears again in2022's Sonic Origins, and though it's not subject to any Trophies or Achievements, is well worth a visit for those who didn't play the mobile releases.
If you are attempting to access this from the Sonic 2 level select cheat, know it must be accessed normally first - with the following section explaining how.
Where is Hidden Palace Zone in Sonic 2?
To reach Hidden Palace Zone, you must play until you arrive at Mystic Cave Zone Act 2.
Play the level, with the route taking you along the bottom of the stage, until you come to a section with four fireflies up a slant - two of which are next to three rings in the air - followed by a closed bridge that you must open by jumping onto a hanging switch.
The above video will show a route you can take to reach this point. Otherwise, the spot you are looking for will be the following:
Don't jump onto the switch! Instead, drop down the pit. Instead of losing a life, you'll appear in a new stage...
You'll now start Hidden Palace Zone. This is just a single act - but comes complete with a unique Robotnik boss battle at the end - and once completed, you'll start on the next stage after Mystic Cave Zone, Oil Ocean.
If you want to access the Hidden Palace Zone again in future, know that you can use the Sonic 2 level select cheat to jump straight in. However, you'll have needed to have visited the Zone through conventional means - i.e. the above method - before that's possible.