Guitarist,
In the simplest termas I can explain, the job of the shocks is to keep the Jeep (or any car, for that matter) from continuing to bounce up and down after hitting a bump on the road. In other words, they let the suspension (the actual leaf springs or coils - coils in your case) move up and down, but put some pressure on both directions so that the spring moves up and down only a couple of times...
Now, get a shock that is very hard (I have heard that Rancho's fall in this category, but have never run them myself, so I cannot attest to this), and the up and don will be drastically reduce, but the ride will be harsher. Get one that is too soft (or a broken shock), and the ride will be very soft, but the jeep will continue to bounce up and down (you have probably seen some car with broken shoks; when they over a speed bump, they continue to bounce up and down the rest of the street!).
If you want to know which shocks work well, simply ask, and peolpe here will surely tell you their opinion of any brand they run...
Now, when they talk about suspension lift, in your case (coils), it can mean 2 things: spacers on top of the coils (also called Budget Boost) or actually longer coils (Suspension Lift). For 2 inches, the budget bust shold work just fine and save you some money. Just keep in mind that anytime you change suspension travel you need to make sure the shocks can handle the new distance...
As for the body lift, I agree with what is said before; I would not go more than 1" if any. Not only is it dangerous, it just looks weird to have that much.