The NP203 is a full-time 4WD transfer case. The shift pattern (from the dash to the seat) is Lo-Lock, Lo, Neutral, High, and High Lock. High is used for normal driving. The 203 has an internal differential similar to an axle that allows driving on hard pavement (so the front and rear driveshafts can turn at different speeds). The Lo-lock and Hi-lock positions are used to lock out the differential for positive power to both the front and rear axle. You can shift between Hi & Hi-Lock and Lo & Lo-Lock on the fly. To switch ranges you have to stop and preferably put the transmission in neutral.
The only downside I have found with the 203 is that the shift linkage is a bit clunky, and sometimes it is hard to tell what gear position you are in. Also, it was not uncommon for folks to modify the 203 to part-time 4WD to improve gas mileage, in which case the shift pattern I mentioned above would not apply.
Hope this helps.