first off, what is this system and what does it do exactly??

When I select it, the light just blinks on the dash... my 4HI and 4LO work fine, but A4WD seems to be dead, yet still the light blinks

 

is it not Automatic 4 wheel drive? so you turn it on and when the vehicle detects slipping it engages 4wd

 

exactly, heres some info from a 2006 expidition workshop manual

In A4WD, the 4WD control module varies the torque split between front and rear drivelines by controlling the transfer case clutch. Under most conditions, the 4WD control module activates the transfer case clutch at a minimum duty cycle (percentage of time the clutch is turned on) which allows for a slight speed difference between the front and rear drivelines which normally occurs when negotiating a corner on dry pavement. When the rear wheels are overpowered, the 4WD control module detects this slip condition and the duty cycle to the transfer case clutch is increased until the speed difference between front and rear drivelines is reduced. In this manner, the 4WD control module can redirect engine torque to the front wheels when the rear wheels lose traction yet still allow operation in the A4WD mode on dry pavement.

 

didnt answer OP question why is it blinking? it should stay soild

 

he didn't ask why it was blinking he just said it was. he asked what A4WD was and what it did. idk why it's blinking