Wheel Slip

Torque is the twisting force produced by engines. It is the torque force produced by the engine that turns the wwheels and moves the car. The lower the gearing the greater the force transferred through the wheels. The lower the gear, the higher the torque sent to the wheels.

Traction is the name for maximum amount of force which a tire can apply on the ground, 4x4 systems need to ensure that they don't make the driver exceed their traction.

Here is a simple animation which shows the importance of traction on a vehicle's performance.

{From HowStuffworks)

There are two types of Wheel slip used in 4x4s: Dynamic and Static. In Static Wheel Slip the tire and road do not slip relative to each other. On the other hand with Dynamic wheel slip there is a relative slipping between the tire and the road which gives a lower traction on road. Static wheel slip provides better traction and is generally preferred when traction is the principle feature.

Wheel slip can be avoided in all well designed 4x4 vehicles regardless of system.