Every 4WD uses a transfer case to split the drive coming from the transmission into two outputs: one directed to the front wheels and one directed to the rear wheels. Most 4WDs that we are familiar with are two-speed versions, having a High-range and Low-range gearset. All-wheel-drive (AWD) designated vehicles also use a transfer case, but these normally have only a single gear range (High) and lack the slow-speed capability of a two-speed transfer case.
A 4WD transfer case can also be classified as being a full-time or part-time unit. On a part-time transfer case, the front and rear outputs are tied together. It is not a good idea to operate this type of transfer case in 4WD on dry pavement or other high-traction surface. As your vehicle turns a corner, the front and rear tires will travel different distances and cause the drivetrain to bind. A full-time transfer case has some means of allowing slip or differentiating between the front and rear outputs to allow for on-road 4WD.
The High range on a transfer case is most often a 1:1 ratio. That is to say that for every revolution of the transmission output shaft, the front and rear transfer case outputs rotate one revolution. Factory Low-range ratios can vary from about 2:1 to about 4:1. This means that the road speed in Low range is reduced to a quarter to half the speed as opposed to being in High range. With this reduction in speed, we gain an increase in torque by the same factor. This is a great advantage when trying to turn big tires up against an obstacle.
Transfer cases have come in both geardrive and chaindrive versions. Typically, a chaindrive 'case is a bit quieter, but a geardrive 'case is most often stronger and does not suffer from chain wear, which requires periodic replacement. Usually, a factory set-up transfer case will allow you to choose four drive options when in use: 2WD High range, 4WD High range, 4WD Low range, and Neutral. 2WD Low range is usually not an option due to its anticipated rare use and the fact that 2WD Low range can place a lot of torque on the rear axle only and it is possible to break the drivetrain in this mode if used without discretion.
Some older Jeep Cherokees used a Borg-Warner Quadra-Trac transfer case, which was a full-time chaindrive unit. It had a limited-slip mechanism that allowed the front and rear axles to turn at different speeds as needed when turning corners on pavement. A switch in the cab allowed the driver to fully lock the front and rear outputs together for more challenging off-pavement use. Some newer transfer cases also use some manner of coupler to allow on-road 4WD without drivetrain binding.
The transfer case on your rig is a pretty low-maintenance item as far as drivetrain components go. Some use heavy gear or motor oil for lubrication and typically use a method of oiling that relies on oil sling or oil transfer simply due to the oil sticking to the lower gears and being carried up onto the higher-positioned gears. Other transfer cases use a hydraulic-type fluid such as automatic transmission fluid (ATF). These can have an oil pump that is used to pick up oil from the bottom of the 'case and pressurize it for distribution to various parts of the internals.
For the most part, your transfer case just needs an occasional fluid change as recommended by the manufacturer. If you have an old-style 'case that may use some linkage rods external to the 'case, you may need to hit them up every once in a while with a grease gun to keep them moving smoothly.
Common repairs needed on transfer cases as they age include front and rear output seal or bearing replacement, chain replacement, or rubber shift boot replacement. Other failures that can occur, but which are less common unless the 'case is abused, are broken input or output shafts or broken gears or shifter forks.
Repair is often possible using mostly common handtools, and much of the work is similar in nature to transmission work. Cleanliness and attention to detail can help ensure a proper repair or rebuild.
The aftermarket is thriving with transfer case upgrades. You can buy conversions from full-time to part-time operation, kits to replace your Low-range gear ratio (to as deep as 8:1 for some applications), adapters to stack a second transfer case or gear reduction box in your drivetrain, twin-stick kits that enable the use of 2WD Low range or allow front-wheel drive only (used for competition or needs for tight-radius turning), specialty skidplates and mounts, and heavy-duty input and output shafts. Advance Adapters also makes the Atlas, a complete replacement transfer case with various gear and strength options.
Part-time conversions combined with the use of manual locking hubs can help save wear on your front axle components and keep a little more gas money in your pocket. Gearing upgrades can offer you more low-speed torque and control for hard-core wheeling. With stacked gear reductions, you can have three or more forward gear ranges, offering you much more versatility when you choose how fast or slow you want to move across the terrain.
With the latest upgrades, there's a lot you can do to your transfer case or one you may swap into your rig. There's increased versatility, durability, and gear options to suit most any type wheel-and-tire size combination.