That *looks* like a posi-lok for your front axle. It replaces the vacuum actuated central axle disconnect. When you shift into 4wd you would need to pull out on that to lock the two piece passenger side front axle together. It does not function as a locker.
1990 YJ Islander, 4.2L MC2100 DUI HEI, 2.5" RE lift, 31x10.50 DuraTracs, HandenFab rear bumper / swing-out, Tough Terrain
off-road camp trailer.
Build thread: http://www.jeepforum.com/forum/f22/tys-yj-build-1502554/