Everything is fine, someone just added locking hubs to your truck without putting a kit in your NP203. The 203 is a fulltime 4WD T-case. In "Hi" range it's AWD using the center differential inside the case. Stock the truck would have had drive slugs up front, so the front end would always be engaged and power is split front/rear variably.
So, either keep the hubs locked, or install drive slugs, or install a part time kit in your NP203, or swap in a different transfer case. No matter the choice, nothing is broken.