Think of it this way, when you engage the lever on your transfer case the front drive shaft spins, so the front axles spin. If you do this without locking the hubs in, the axles aren't "connected" to the wheels; the front axles are spinning, but they aren't driving the wheels. When you lock the hubs in, it connects the wheels to the axles.
If you are driving with the hubs locked in 4wd and the tcase in 2 wd, the front axles are still spinning if the jeep is rolling, cause the axles are "connected" to the wheels. When the wheels spin, it casues the axles to spin, but the front driveshaft is not connected to the engine cause the tcase isn't engaged. Hope I didn't confuse you more.
To simply answer your question, yes you have to lock your hubs AND put the tcase in 4wd to put it in 4wd. Newer jeeps don't requre this cause they have "automatic" hubs. These are nice, but are considered less reliable.
In the late 70's CJ7's I have seen some hubs that automatically lock for light mud, and then you lock them in like regular hubs for heavy mudding/ towing. Seemed weird to me, but they worked good (were on a buddies jeep).
85 CJ7 258, borla header, Team Rush, MC2100 ,optima batt, Warn 8274, agr super box 2 & pump, T5 w/ B&M shifter, centerforce 2, superior 1 piece axles, warn hubs 2.5 in lift, 31" BFG MT
85 CJ7 258, A/C, T176, MC2100, Team Rush, Warn XD8000i, superwinch hubs, 3in lift 31" BFG AT/KO