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If you run them in auto, then the hubs are actuated by vacuum when you select the "4x4Hi" setting on the **** (provided there are no vacuum leaks and the hubs have been maintained). The Lock setting is basically a manual way of pulling the hubs in, in the event that you have a vacuum leak or the ESOF fails to pull the hubs in.
With your hubs set to Auto you should be able to move the switch on the dash to 4wd and be in 4wd. This will engage the transfer case and engage the hubs. When you turn it back to 2wd the transfer case and hubs disengage and you are in 2wd and your front axles are no longer turning.
With the hubs in the lock position the front wheels are tied to the front axles which are now turning wether you are in 4wd or not. When you select 4wd then the transfer case will engage. Now the axles are being powered by the drive train. When you select 2wd the transfer case disengages. The axles are still tied to the wheels and are turning, being driven by the wheels.
As long as your hubs are working normally you can leave them in Auto and use 4wd when you need it. The vehicle uses vacuum to engage them in the auto mode and leaks in the vacuum system are not uncommon. In this case when you select 4wd the hubs don't engage and you don't get 4wd, then you will need to lock them manually in order to use 4wd. I read on FTE often that people who live in places with frequent snow leave them locked for extended periods, days, weeks, all winter. Don't have that problem in Gawga so mine stay unlocked unless I know I'm going off road.
Hope this helps,
Edit: i'm to long winded and type to slow. Barthel beat me to it.
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