The Volvo automatic AWD system has no traditional transfer case. Primary power goes to the front wheels. The rear drive shaft incorporates a viscous coupling (Haldex on the new XC-90) and as long as front and rear axles rotate at the same speed the coupling unit would remain inactive and the rear tires receive no torque - they are just rolling along. Would indeed slippage occur at the front wheels, the VC (Haldex) will create a power flow to the rear axle.
But if only the front is powered in no slip situations (which is almost always) and the rear does not get any torque - how can Volvo claim it to be an AWD system?
Surprisingly, if only one axle is powered, front and rear axles do not rotate at the same speed. The powered axle always spins a little faster (about 5%) than the axle with the wheels just rolling along. It slips a little on the ground. So, the VC (now Haldex) reacts to the speed difference and compensates with a proportional allocation of torque for the rear. This way the rear axle will get 5% of the torque and thus each rear wheel receives 2.5%.
Voila! All 4 wheels get power all the time. Volvo PR did not lie - it is full time AWD.
However, a power distribution of 95/5 makes for very insufficient traction use. The front axle is very likely to start spinning with the slightest change of traction. A power split of about 50/50 guarantees the safest use of available traction. After all that's the way 4WD was intended to be. Volvo does not offer that.
A serious drawback of the older Volvo system (Viscous Coupling) is, that you will probably have to buy four new tires if only one is bad.
Please note, that newer Volvos with Haldex couplings do not
suffer damage when the tire sizes are slightly unequal.