In this context, what does it mean - hubs locked, but in 2WD? If the guy can selectively engage front axle, why does he need locking hubs,

In that context, you gain economy of operation. The front wheels are turning, but the front axles, the front differential, the front drive shaft and U-joints are not turning. So you gain two things: less fuel wasted rotating components that are not doing any work; and less wear and tear on those components.

This is probably the most important reason for having lockable hubs.

tanstaafl.