Couple have it here, and then some just posting up what they think.
1. 99-00 Limited models 4wd 4Runners have a center diff
2. All 01-02 4wd 4Runners have a center diff
3. No 3rd gen w/ a center diff 99-02 utilized a Torsen, they use an Aisin unit, the Torsen is in 4th gens, which is better is open to discussion.
4. Axles are open, meaning when you go around a tight corner the outside wheel can travel a greater speed and distance then the inside wheel, if the axle was locked the tires would be forced to spin the same speed thus they would hop, bark and skip around the corner, on dirt of course it would be no issue as the tire could easily slip, on dry pavement not so much.
5. Now the same theory goes for you front diff either locked or unlocked, but no 4Runner ever came stock w/ a front locker.
6. The center diff does the same thing as any other diff in a way, it allows your front and rear driveshafts to spin at different rates. With most 4wd systems you have one inside wheel spinning and on the other diff the outside wheel will spin, so the theory is the same going around corners, they need to spin at different rates, the center diff is what allows for this slippage between front and rear axles via the driveshaft.