The 4WD transfer case encoder motor position sensor or the selector switch may fail causing the service 4WD message to be displayed. Fault code(s) stored in the transfer case control module will be of assistance in determining the exact fault causing the message to be displayed.Google+
Car Problem Reports
GMC Yukon XL 2500 4WD Transfer Case Position Sensor/Selector Switch May Fail
GMC Yukon XL 2500 Problem
Average Mileage: 89,000 mi (68,000 mi - 110,000 mi)
Visitor, 2005 GMC Yukon XL 2500, 68,000 mi
The first time this happened, I resoldered the connections on the switch and it worked another two years. Then at the next failure, I replaced the switch. Not hard to do either.