My Cherokee is all wheel drive. I noticed that

You need to be more specific. To start, which 4 wheel drive system your jeep has? (Select Trac, Quadra Trac II or Quadra Drive)
Then: does it never work, or only in 4-Lo?

Locate a dirt parking lot or field and engage the 4wd. Make a slow tight turn and you should feel some resistance while turning as the wheels dig in and fight one another causing the steering wheel to shake somewhat too. Do not attempt this on pavement or damage may occur. If you can turn freey and not notice any difference then when your in 2wd its likely not working.

If there is an option to run 2wd, that would be the most fuel conservative option. You shouldnt need 4 wheel drive unless you are driving in snow and or mud, or need extra torque while towing a load. 4 wheel high would be the most common under the given circumstances. 4 wheel low is a lower ranged gear that gives you more power to climb hills or remove your vehicle from "sticky" terrain.

I hope so, it shouldn't be in 4 wheel drive unless you need it, 2 wheel high is where it should be when driving habit are on city streets or highway driving.

unless your going to rebuild this yourself i would be bring it back for inspection. Its your only option.

Correct

Sounds like it is in 4 wheel drive mode.
If you have a switch to disconnect the 4 wheel drive it may not be working.
If the vehicle is full time 4 wheel drive or computer controlled 4 wheel drive you have most likely a locked in full 4 wheel drive mode situation.
Not good on dry pavement.

No, not with out a lot of work. Electronics are most likely different on the 2 also.

check the vaccume module on the front axel it my have come un pluged or the electric connector hope this helps

Just pull up on the 4 wheel drive lever .. You can shift on the fly to part time and full time but you gotta stop and in park or neutral you can shift into 4 wheel lo .. I have one myself .. love those jeeps .. you "understand"