OK Lets start at the beginning and work through the drive train at the front you have an engine it provides the power that somehow needs to get to the wheels, it first goes though a gearbox to get reduced or geared up to a point you can send it to the wheels. OK enough on that bit
Next it goes to the 4wd system…
So now how does it all work? There are almost as many different types of four-wheel-drive systems as there are four-wheel-drive vehicles. It seems that every manufacturer has several different schemes for providing power to all of the wheels. So there is a couple of different ways and a couple of things you didn't cover and another type of locking diff! Viscous coupling or transfer case
Right you have 2 styles of 4wd (to make it simple) part time 4wd and full time 4wd.
OK so part-time 4wd. These systems are meant only for use only in low-traction conditions, such as off-road or on snow or ice and are what most offroad 4x4's have and this is accessed by the transfer case (extra lever/button) in your 4wd (and gives also access to low range) this is usualy geared or chain driven and allows no slip (is locked).
Full-time four-wheel drive. These systems are designed to function on all types of surfaces, both on- and off-road, and cannot be switched off (usualy) these are the systems found in most cars, some landrovers, and other makes I am sure these are allways in 4wd and have another diff (with a locking mechanism in landrovers) or a viscous coupling. This is to allow some slipage between the front and back wheel's,
The viscous coupling is commonly used to link the back wheels to the front wheels (through a diff) so that when one set of wheels (both front or both back) starts to slip, torque will be transferred to the other set.
Right so out of the gearbox and into the transfer case, viscous coupling or diff what are these for and why are they here?
Well these all-wheel-drive vehicles need a differential between each set of drive wheels, and they need one between the front and the back wheels and we need to power these somehow, because the front wheels travel a different distance through a turn than the rear wheels they need to be disconnected or allow slippage on very grippy surfaces (roads clay etc) this is why we have part time, a viscous coupling or a diff system so
What is a differential:
The differential is a device that splits the engine torque two ways, allowing each output to spin at a different speed. This is all the centre diff does, the diff the driveshaft goes into (between the wheels) is a bit different.
Why do You Need a Differential ?
Car wheels spin at different speeds, especially when turning. In a turn each wheel travels a different distance through the turn, the inside wheels travel a shorter distance than the outside wheels. Since speed is equal to the distance traveled divided by the time it takes to go that distance, the wheels that travel a shorter distance travel at a lower speed. Also the front wheels travel a different distance than the rear wheels, the differential is the only thing that allow's all this to happen without screaching tires and bad road manners.
Right we have the power running down the driveshaft to the diffs between the wheels what do they do?
The final differentials have three jobs: (when in 4wd)
To aim the engine power at the hub’s (that the wheels attach to)
To act as the final gear reduction in the vehicle, slowing the rotational speed of the transmission one final time before it hits the wheels (via the hub’s)
To transmit the power to the wheels while allowing them to rotate at different speeds (This is the one that earned the differential its name.)
Ok in these two final differentials what types are there and what are the differences
OK
Open diff The open differential always applies the same amount of torque (turning force) to each wheel. Now what happens if one of the drive wheels has good traction, and the other one is on ice? This is where the problem with open differentials comes in.
Remember that the open differential always applies the same torque to both wheels, it doesn't take much torque to make a tire slip on ice so when the wheel with good traction is only getting the very very small amount of torque that can be applied to the other wheel on ice, your car isn't going to move very much.
Limited Slip differentials use various mechanisms to allow normal differential action when going around turns. When a wheel slips, they allow more torque to be transferred to the non-slipping wheel (inside wheel). This type of LSD has all of the same components as an open differential, but it adds a spring pack and a set of clutches.
The spring pack pushes the side gears against the clutches, which are attached to the cage. Both side gears spin with the cage when both wheels are moving at the same speed, and the clutches aren't really needed -- the only time the clutches step in is when something happens to make one wheel spin faster than the other, as in a turn. The clutches fight this behavior, wanting both wheels to go the same speed. If one wheel wants to spin faster than the other, it must first overpower the clutch. The stiffness of the springs combined with the friction of the clutch determine how much torque it takes to overpower it.
Getting back to the situation in which one drive wheel is on the ice and the other one has good traction: With this limited slip differential, even though the wheel on the ice is not able to transmit much torque to the ground, the other wheel will still get the torque it needs to move. The torque supplied to the wheel not on the ice is equal to the amount of torque it takes to overpower the clutches. The result is that you can move forward, although still not with the full power of your car.
The locking differential is useful for serious off-road vehicles. This type of differential has the same parts as an open differential, but adds an electric, pneumatic or hydraulic mechanism to lock the two output pinions together.
Lockers come in two types Selectable Locking and Auto unlocking
Selectable locking diffs are open diffs until a force is applied to it like ARB air lockers
Auto Unlocking diffs are always locked and sprung to unlock when one wheel is forces to over run the other (this style you can hear clicking on roads) This second type is a lot cheaper than the selectable ones but have disadvantages.
Again in the ice situation both wheels will turn at the same speed so you can move away at normal speed as long as one of the wheels has some grip.
OK why do not all manufactures put in LSD or lockers in 4wd’s from factory?
Well LSD and Auto unlockers have worse road manners (push) on corners and selectable lockers are not cheap also there are a whole lot of different types and styles of every type, they cost more and are another thing that wears or can break. They also increase the stress on the rest of the drive line, but they make such a huge difference to offroading that some put up with their behaviours and learn to drive with their particular soloutions characteristics.
Right so what are manual and Auto locking hubs?[\b]
Part-time four-wheel-drives usually have locking hubs on the front wheels. When four-wheel drive is not engaged, the locking hubs are used to disconnect the front wheels from the front differential, half-shafts (the shafts that connect the differential to the hub) and driveshaft. This allows the differential, half-shafts and driveshaft to stop spinning when the car is in two-wheel drive, saving wear and tear on those parts and improving fuel-economy.
[b]Manual hubsare locked and unlocked when you are at rest and you have to physicaly get out and lock or unlock them.
Auto Hubs are controled by a computer or gear stick selection and will engage and disengege when the computher thinks it should rather than when you want them to Quite a few auto hubs disengage when you select reverse sharp corners and other pre programed times, not good if you are in a mud hole.
OK with all that I hope this helps you look for more answers on the net and understand what you read on there.
:EDIT Sorry for the megapost
but now we have a reference
So whats the difference between lockers and locking hubs... manual hubs, auto hubs?? why are they so different in the way your diff functions... and just how does it function and how does it all work???...
They lock themselves...... automatically 
the info here has been an awsome learning curve for me!