4WD and AWD are marketing terms. They don't describe any particular technology. That said, traditionalists like to think of "4WD" as the traditional differential, transfer-case setup that graced Jeeps, body-on-frame trucks and such.
Today, there are a greater number of technologies designed to deliver power to all four wheels - and manufacturers are now calling what was traditionally known as "AWD", "4WD". This has created a ton of confusion and manufacturers have done little to clear things up (and I dare say, the SAE has been far too quiet on the subject).
Simply speaking, the current Pathfinder has what is more frequently thought of as an "AWD" system. That is, rather than using a traditional set of differentials, it is predominantly a FWD (2WD) vehicle that has the ability to transfer torque to the rear wheels by way of a clutch pack. These systems are NOT designed to split torque between the front and rear consistently. Rather, they operate on the principle that the rear wheels are only engaged when additional traction is needed.
For most people, the "AUTO" mode is the correct setting for normal driving. In this mode, the system proactively sends torque to the rear wheels when launching from a standstill to aid in traction. Additionally, the system will reactively send torque to the rear wheels in the event of a loss of traction while underway.
The 2WD mode is there for optimal fuel economy. For example, if you spend the majority of your time driving in fair weather, you have no need to divide the output of your engine amongst four wheels as opposed to two. In practice, I don't notice a great deal of different in terms of fuel economy when running in 2WD, so I have taken to just leaving it in AUTO full time.
4WD mode is meant to get you out of a STUCK situation. For example, if you car bogs down in heavy snow or in mud and is immobile, the system is intended to get you out (and then it resets back to default, once you get underway). The reason for this is that the Pathfinder does not have an open differential, and so when you're going around turns, the wheel at the outer edge will want to turn at a different speed than the inner wheel, causing binding (and damaging the clutch pack).
In short, you do NOT want to put the vehicle in "4WD" unless you are completely stuck or encountering a severe situation. In general, you want to be in AUTO mode for most kinds of terrain the current generation Pathfinder is likely to see (keeping in mind that this mommymobile/CUV version is not intended to be rock-crawler like the old one was).
Hope that clears things up a bit.
Current: 2016 Toyota Highlander XLE in Predawn Gray Mica with Ash leather
Former: 2013 Nissan Pathfinder SL Premium in Dark Slate with Charcoal leather
2010 Subaru Legacy 2.5i Premium in Venetian Red Pearl with Black cloth interior