I have noticed the lock-up functionality of today's transmission is different than on older toyota transmissions. I have an 06 V8 Nautical Blue 4Runner and my impression is that the lockup seems to disengage when you take your foot off the accelerator or are going up a hill. when you put your foot back on the pedal the lockup engages again.

The lockup I am familiar with is the kind that locks up only in O/D at speeds above 45 MPH and does not disengage until you drop below 45 MPH or down shift out of O/D even when going up a hill the lockup won't disengage. For example cruising at 65 MPH On this type of lockup setup the tach needle does not move (no rpm change) when you back off of the throttle nor does the RPM change when you gently increase throttle (similar to what you would encounter with a manual transmission). This type of lock-up is not electronically controlled but rather hydraulic via a lock-up relay valve in the valve body.

Which system is better or will contribute to transmission having a long life?

personally, i alter my shift position between 4 and D depending on my driving conditions.

When i'm around town, and i don't go more than 1/2 mi in between slowing or stopping or over 50 too often i will generally leave it in '4' to stop the tranny from unlocking and dumping into over drive.

On the highway, of course i put it in D for the lower rpm's.

I put it in 4 in the earlier situation because it generates quicker throttle response because the tranny is in a gear it can work with and only downshifts when i really punch it. Whereas when in D, any kind of accelleration usually requires the tranny to move a gear.