Let's start this with an np203 with no conversion. It is a full time transfer case...that is, of course, all four wheels receive power at all times. The shift pattern for this is:
(front)
Low Loc
Low
N
HI
Hi Loc
With this Hi is your normal driving position. All four tires are driven, but, the front and rear axles are driven independent from each other. They are free to turn at what ever speed. This is done thru a differential in the transfer case like the one in your axle. If you shift to Hi Loc you are still in Hi range, but, the front and back axles are now locked together and turn at the same speed. Again, the same way a locker works on an axle. The Lo and Lo Loc works the same way only using a lower range gear in the transfer case.
Now..part time conversion...There are a couple of conversion kits out there and I'm not sure which you have, so, I won't get into that. The end result is the same with all of them. The first thing is the locking hubs. You are now able to disconnect your front axle from the wheel. This prevents the wheel from "driving" the axle. Now your shift pattern has changed...but, not much:
(front)
Lo Loc
Lo
N
2 HI
HI Loc
The only difference is the HI Loc has become 2 HI. The differential in the transfer case has been"disconnected" so it will not drive the front axle. And this is your normal driving position.