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A transfer case has 2 out put shafts that face in opisite directons the rear one drives the rear wheels and the forward one, the front wheels. The rear one is the main drive and is in motion anyntime the transmission provides input. When 4X4 is selcted, a shift dog moves an idler gear rearward and engages the two shafts together and 4X4 is the result. To get 4X4 Hi or Low. the selctor simpley moves the idler gear to a bigger or smaller gear on the primary shaft, depending on what speed was selected .
Reference : New Process Gear
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