Unfortunately, I can't lay my hands on any GV front-end information...  So let's take a look at various 4wd engagement systems:
First the tried-and-true locking hubs.  Turn the knob one way and the axle shaft is connected to the wheel.  Turn it the other way and the wheel is disconnected.  If the hubs are unlocked, it don't matter what mode the transfer case is in, you have 2 wheel drive.
Second, auto locking hubs.  Follow the instructions in the owners manual and they engage or disengage like a manual hub at the wheel -- if you hold your mouth just right.  Again, unlocked and you have 2 wheel drive no matter what mode the transfer case is set in.
Third, the slip-joint coupler in the front axle housing method.  Found on various Jeeps, this system consists of a sliding joint -- usually found on the long section of the front axle -- that disconnects the wheel from the differential.  The sliding coupler is acutated by a cable or a vacuum line through a button or lever in the passenger compartment. (EDIT: or as Rhinoman has suggested, electically through the ECU or the 4x4 indicator.)  The wheels are always connected to the front axle shaft (no locking hubs).  No matter what mode you have the transfer case in, if you don't push the button or pull the lever, you don't have 4-wheel drive.
Now, on to speculation...
A fourth possibility might be a combination of  two and  three above.  Upon putting the transfer case in 4-wheel drive, the energy transmitted through the front driveshaft causes the sliding coupler to move and lock the inner axle onto the outer axle putting the truck into 4 wheel drive.  When the transfer case is placed back into the 2 wheel drive mode, the coupler releases and the front wheels are running free again.
What do you think?