If those lights are blinking and you have to ask (i.e. you don't feel any handling/performance difference) then you are NOT in 4wd.

The front axles in a gen II are engaged/disengaged at the differential by a vacuum actuated system. If the system is working correctly, then the lights only blink when (a) you have selected 4wd but the front axles haven't yet engaged, or (b) you have gone from 4wd to 2wd but the front axles haven't disengaged yet. When you are actually in 4wd the front wheels should be lit solid.

There are electrical, mechanical, and vacuum components to this system, and any one of them not working could keep your front axles from engaging. Here's a good article on another sight that someone else has linked to this board in the past. It helped me understand my GenII and it should help you trouble shoot yours: Flashing Light Fix

Hope that helps. Good Luck!