My wife has that on her '02 GMC Envoy 4x4; I had lots of fun with that little feature up in KS/IA/NE area last Winter.
A4WD does pretty much what the manual says; at a minimum, 1 rear wheel has to lose traction before the front wheels get driven by the front case. It's great for wet/slightly icy/slightly snowy driving as a small insurance policy, though when we had LOTS of snow or ice (OK, lots for KS and no snowplows in sight), it was all 4HI.
I wouldn't rely on it in particularly nasty weather, as if one were to get entirely stupid with a corner or takeoff, it would "engage" FAR later than I would be comfortable with in a real emergency situation. I found this out toying around with it on a deserted parking lot in KC last year. Again, you have to get pretty idiotic with the truck before you can "fool" the A4WD into engaging late, but it can be done and by the time it engages, you can have the headlights shining perpendicular to the road...
...which gives you traction at PRECISELY the wrong time and in the wrong direction, unless your objective is to leap your ride into a ditch/divider/oncoming traffic, etc., etc.
Once more, let me REITERATE that you have to be:
a) driving FASTER than you should in bad conditions and
b) driving like a bloody idiot in those same conditions
to throw the A4WD for a loop.
Murphy's Law/common sense/personal experience tells me to use 4HI in the nasty stuff and firsthand experience with the A4WD feature tells me to use it in the light stuff...
Find DESERTED patch of iced-up concrete to get the feel of it; you may find it entirely suitable for what you drive in.
