Its for going into 4-wheel drive in lower gears so you can't go as fast on 4-LO as you can on 4-HI. (I wouldn't suggest off-roading in a Liberty thought) Use 4-LO when you encounter rough terrain in which case you will be going slow anyway so it doesn't matter. Use 4-HI for icy or snowy roads that aren't in that bad of condition but please, still be careful and use caution.
P.S. 4-LO gives you more torque at low speeds which means more power for in mud at low speeds, but try to avoid big mudholes
