How does it work ?
There are two shafts, each with two gears. The first shaft is the input (engine) shaft and has two gears on it. The second gear on the input shaft is for the front wheels and the first gear is for the rear wheels. The second gear is attached to the shaft and it always turns with the shaft, so the fourth gear always turns too, the front axle (2wd) always has power. (The second shaft has a gap on it, so the rear axle and the front axle exits on the second shaft are disconnected. This way, when the fourth gear turns , the third gear is motionless.)
We see the first gear on the photo. It is independent from the first shaft, so when the shaft turns, the gear is motionless. It is surrounded by two pipes fixed on the shaft which hold the gear in place. The gear has 7 little holes in it. The switch is on one of the pipes surrounding the gear and it is connected to the pipe like a train on a rail. This way it turns with the shaft and at the same time it can move along the pipe.
When the shift is moved, the seven small sticks on the tip of the switch enter the seven small holes in the first gear, causing it to turn with the shaft. This provides power to the third gear, so as a result, four wheel drive mode is activated.
The Second Shaft
Since the rear axle and the front axle are connected to the second shaft and since they need to be independent from each other, another method is used here. The second shaft can be seen on the photo.