Gear ratio affects the felt power at the tires. It's all about leverage. Think of it as a breakerbar on a lug nut. The longer the bar, the easier it is to turn the nut. The deeper the gears, the easier it is for the engine to turn the wheels and the more powerful your engine will feel, especially when starting from a stop. Now, there is a sweet spot in all this. On the other end of the spectrum, 5.86 gears on 27" street tires is way too much gear. Picture yourself at the end of a 10 foot breaker bar. It's easy to turn, but you have to walk a long way to do it. When my 88 was still a lowly 2wd doing DD duty, I went from puny 27" tires to 30" tires and my engine suddenly felt gutless. I would even stall sometimes if I wasn't paying attention at a green light. When the Dana 35 blew up on me, I took the opportunity to find a 3.55 geared axle and the truck came alive again. :D The bigger tires shrink your theoretical breaker bar and the deeper gears compensate for it.
As to what gears work best? That's a bit of science and a bit of opinion. A lot depends on the engine, trans, and tire size. I was very happy with 3.55s in my 4.0/stick on 30" tires in my 88. For the little bit of time I actually got to drive my 90, I was also happy with 3.55s in the same combo but with 31" tires. Asking around, you'll find that 4.10s also work great for 4.0 street trucks wearing 30-33" tires (I hesitate calling my 88 a "street truck" anymore). If you've got a 2.5L, then it all changes, as the 2.5 has less power and needs more leverage on those tires. In my opinion, 4.10s are the minimum for a 2.5 truck on any size tires. But I guess this really only applies to the 2.5L/4speed stick trucks that got screwed with 3.55 gearing. (A 4.10 upgrade in those trucks should really be matched with a 5spd upgrade (the AX-4 and 5 are identical externally and so swap directly) if the truck sees a lot of freeway travel.)
Whomever at Jeep that thought 3.07 gears behind the 4.0 or 3.55s behind the 2.5 was a good idea should have been shot. :fs1: