On the 87-90 YJ the front differential is vacuum actuated by a diaphragm on the right side of the axle housing. When you shift into 4x4 with the engine running the transfer case switches the vacuum to the diaphragm which will engage or disengage the front axle. Pretty simple system, I think there's 3 or 4 vacuum lines. One also controls the 4x4 light on the dash through a vacuum switch mounted on the firewall just to the right of the battery.
