I bought a used 96 jeep cherokee 4x4, it appears to have been lifted some, it looks like it is higher than normal.

I have been reading on here about transfer case drop, I dont know what this is. My transfer case is touching the skid plate and when it is idleing in gear it rattles on the skid plate.

What is the proper way to fix this? I asked this question in another thread but didnt have the information at that time about transfer case drop, so I thought it might be better just to start over.

 

a tcd is were u lower your tc to acomidate the angle of the drive shafts so they dont bind wen adding lifts

 

By the sound of it, ur TC is already dropped or sagging.
I'm not familiar with the lift on the vehicles, so this may be related to that, however my TC is sagging and rattling on the skidplate as well (no lift), and this is due to the transmission mount wearing old and slowly lowering everything. Mine should be replaced (together with the engine mounts), lifting the TC away from the skidplate again.

 

Its easy to tell if you have a t-case drop basically your crossmember will be dropped a inch or 2 away from your frame. Sounds just like a tranny mount might be bad though.