This may be a stupid question, but a friend just bought a Discovery. I think the year is 2002. Anyway, I noticed the H/L/N was set at "H". I have a Jeep and assume this similarfor towing/hills. He doesn't have the manual. I told him I think it should be set at "N" for normal city/highway driving. Is that correct?

 

NO!!
I love when Jeep owners ask LR questions.
All Land Rovers are Full-Time-Four-Wheel-Drive, meaning that all four wheels are under power all the time. Your Jeep is part time four wheel drive, meaning only your rear wheels are under power unless you engage the transfer case.
The Hi-N-Lo gear shifter you are talking about is for the trasnfer case, Hi for normal everyday driving and light easy offroading, "N", or neutral for towing the truck on all four wheels. This will dis-engage the driveline from the engine. If you put it in "N" and thenshift into park the truck will roll away.
Lo is for offroading and pulling houses off of their foundation.
Does that answer your question? If not just shout and we will chime in.

 

At least jeepers are good for a laugh, if nothing else. Apparently he doesn't use the transfer case in his Jeep either.

 

And just to clerify, all wheel drive is different from full time and part time four wheel drive.

 

As was said H is on road, and L is off road or on road very slow, N would be neutral.
Traction is controled by the brakes, if one wheel starts to slip the brake is applied to stop it to get
the other wheel going on the same axle, it works but the 3 amigos well thats another story.
What most won't tell you is they asked the samething when they got theirs.
A Disco I's has more settings .

 

Also when the t-case shifter is in neutral you will here at chiming sound and a light will go off on the dash letting you know you are in neutral.

 

we dont have those light connected up over here

I wanted to add it in, but the case is different for where the switch is mounted...........poo bummmm