Principles of Operation: Neutral
WARNING: This page is about a different car, the 2005 Ford Pickup, 2005 Ford F550 Super Duty, 2005 Ford F450 Super Duty, and 2005 Ford Cab & Chassis. However, it is still accessible from the selected car via links, so may be relevant.
With the transfer case shift lever in NEUTRAL, no power is transmitted to either the front or rear axles. All the planetary gears turn freely with the input shaft and the chain sprocket floats freely on the output shaft.