I bought a KIA Sorento with AWD. I read the owners manual and my understanding is that it is 2 wheel drive but kicks into 4 wheel drive only when it detects slippage. Is this correct?
Yes that is correct- 2 wheel drive basically means that only two wheels have power over how fast the car is going- therefore 4 wheel drive is all of the wheels being able to power the vehicle, (2WD 4WD)
All wheel drive has a transfer case that splits power to the wheels as needed depending on what the computer sensors detect. For the most part it works fine as long as its working right. The technology for this type of transfer case is very expensive and if you ever have a problem with it it gets expensve in a hurry. Some auto makers have better products than others so it pays to pay attention and not buy one that does not perform well. A malfunctioning system can ruin a set of tires in 10,000 miles so if your traction control ever needs attention take it in and have it checked.
I'm not a big fan of Kia but the AWD in the Sorento is nice. It normally delivers power to just one axle (the rear axle, I imagine). If the ABS sensors report wheel slippage it goes into AWD, where power is delivered to all the wheels in a reasonably balanced way, making it good for slippery streets. This is a real improvement in fuel economy and tire wear over full-time AWD, like the Subaru system. There is also a lock mode (if it is like the description in the first source), where it goes into actual 4WD operation with the front wheels locked except at high speeds. You want to avoid that mode on pavement and just use it off-road because it forces a front wheel to slip when you make turns and is murder on fuel economy.