I believe it's fairly common - at least it is on the '98~'05 GVs that the XL7 is based on.
The front differential has an air operated free wheel clutch - which acts as a replacement from manual or automatic free wheel hubs. When you're in 2WD the clutch is disengaged and the front wheels are not connected to the differential, when you select 4WD, the ECU turns on a little air pump behind the front bumper and that pressurizes the system and the clutch engages, connecting the front wheels to the differential, so that you have 4WD - the pump turns off and the 4WD light turns on.
If the pressure drops below a certain level the pump will turn back on briefly to maintain pressure so that the clutch will stay engaged and the front wheels stay connected to the differential - it is when the pump turns on, that the 4WD light winks off, and when the pump turns back off, the light comes back on.
I'd say if it's just the occasional blink, it can be ignored, but if you notice it blinking more & more frequently, it's an indication that the system has an air leak - maybe a cracked or loose hose, sometimes the pump fails, sometimes it's the actuator in the differential itself.
EDIT - This may or may not be applicable to your particular XL-7 - depending on the year. I just had a look at the parts catalogs - up to '03, the XL-7 used the same ADD setup as the GVs, but '04 and later are different - there is still an ADD, but I have no idea how it works.
