I have owned all-wheel drive vehicles before, but they both were full-time all-wheel drive with computers and sensors that did all the thinking for me.
You don't say what type of vehicle you have. If it is a 4Gen (2003, 2004, 2005) 4Runner then it also is full time all-wheel drive. If you have a V6 engine then the vehicle also has the option of being placed in two-wheel drive mode.
The 4Runner has open differentials front and rear and a Torsen limited slip differential in the center. The center differential can also be locked.
Here is a thread that describes the 4Runner system:
http://www.toyota-4runner.org/showthread.php?s=&threadid=12&highlight=ATRAC
With the center differential unlocked you can have one tire on each axial loose all traction and power will still be sent to the other 2 tires. If both tires on an axial loose all traction then no power will be sent to the tires on the other axle.
With the center differential locked then 3 tires can loose all traction and power will still go to the remaining tire that has traction.
I used to lock the center differential as soon as I left the pavement but since locking the center differential also disables VSC I now wait until road conditions are severe enough that I am traveling at less than 25 mph before I lock the center differential.
Another reason to lock the center differential would be for the purpose of disabling VSC. If you deliberately want to spin your tires to try to get out of snow or mud then you need to have VSC disabled.
4Lo changes the gear ratio between the engine and wheels so that you can get more torque for going up very steep hills. Maximum speed in 4Lo is about 35 mph (check your owners manual for exact numbers) down to about 5-10 mph in 4Lo-1st gear. 4Lo is also good for when you want to go slowly such as down a steep hill or on a very rough trail as you use engine braking to slow the vehicle instead of the brake pedal.
