At least in the US, Four Wheel Drive 4WD describes a system in which all four wheels on an automobile are driven through the use of a central transfer case that transfers power to the front and rear drive systems, typically though differentials. The same system can apply to vehicles with more or less than four wheels, at which point it is referred to as "x wheel drive" where x is the number of wheels. In the UK, "four wheel drive" means both four wheel drive, and all wheel drive.
Four wheel drive is differentiated from all wheel drive (AWD) in that AWD systems use a differential between the front and rear to allow them to turn at different speeds. This is useful because during a turn, the front and rear axles will attempt to turn at different speeds. (See: all wheel drive, differential)
In spite of this particular failing, 4WD systems are still being used, primarily on sizable pickup trucks and intended for off-road use. Why is this? What becomes a liability on a high-traction surface like a road can be a boon when you are in the dirt. Having the front and rear axles turned at the same speed means that the vehicle is both pushing (with the rear wheels) and pulling itself (with the front) at the same rate, which maximizes traction. This is especially important while climbing hills. Many 4WD vehicles are fitted with aftermarket locking differentials, usually pneumatically actuated as such a system is much cheaper than an electrically-actuated one. This allows all four wheels to be turned at the same rate.
In addition, 4WD is also lighter than AWD. In a system in which the anti-lock braking system (ABS) is used along with "open" front and rear differentials (See: differential) traction can be maximized yet further.
The important part of the 4WD system is the transfer case. Generally speaking this is attached to the rear of the transmission, and the drivelines run from it to the differentials. The average transfer case can be shifted only when the vehicle is stopped and in neutral, and has four positions: Neutral (for towing), 2H, 2L, and 4L. H refers to "high" gear, while L means "low". High gear is meant primarily for unladen daily driving and freeway use, while low gear is for towing. Unlocking the front hubs and putting the transfer case in neutral avoids burning up the transmission and other drivetrain components while towing the vehicle. This is highly useful given that many off-road vehicles are towed regularly.