I finally got the chance to get out in the snow with my new 96 cherokee sport and I have a few 4 wheel drive questions. I was driving to my grandmother's house yesterday in the blizzard the east coast had and some areas of the road were very slick. So what I did was just take my foot off the gas and pull up on the transfer case handle while moving to drive through snow covered areas on the road. Then when I hit a dry stretch of road I just took my foot off the gas and put the transfer case back in 2wd. I know my 4 wheel drive was engaging properly because there was some instances of tight turns and I could feel it binding up when it was still in 4wd.

Is this the correct way of putting it in 4wd? My friend argues with me that you need to stop and put it in neutral first then switch? His Cherokee is a lot more beat up than mine so I am not sure if he just has to do that with his?

what you were doing is fine, they are designed to work like this.
If you are stopped (like at a stop light), throw it in neutral and then 4wd.

4L (low) requires you to slow to pretty much a stop and put it in neutral; 4H (high) can be engaged while moving at any legal speed.

I personally engage my 4wd (H) at about 25mph and engage my 4wd (L) at about 3mph - 0mph.

Jeeps Website:

Shifting into 4WD High Range can be made with the vehicle stopped or in motion. If the vehicle is in motion, shifts can be made up to 55 mph (88km/h).

Shifting into or out of 4WD Low Range is possible with the vehicle completely stopped, however, difficulty may occur due to the teeth of the gears not being properly aligned. Several attempts may be required for clutch teeth alignment and shift completion to occur. The preferred method is with the vehicle rolling at 2 to 3 mph (3 to 5 km/h). Avoid attempting to engage or disengage 4 Low Range with the vehicle moving faster than 2 to 3 mph (3 to 5 km/h).
4wd Low - Do not exceed 25 mph (40 km/h)