No, AWD is all 4 wheels all the time, you cant turn it off. The AUTO 4WD in the sierra, silverado, suburban, etc.. is 2WD unless the rear wheels start to slip, then it automatically turns 4WD on without you touching anything and sometimes without you knowing it. This feature was added so you can maintain the gas milage of 2WD while still getting the traction of 4WD when you need it.
No the auto 4wd comes from a clutch pack in the t case, which when front propshaft speed is lower than the rear there is a senseor that sends a signal to some sort of module which tells the encoder motor to apply pressure to the clutch plates causing the clutch basket ( which is splined to the drive sprocket on the chain) to match the speed of the rear shaft. therefore "automatically" engaging 4wd