Here’s an article i found in Yahoo!Pets
As acute as a dog’s hearing is, we ought to give them a little more credit for understanding our language. We know we can teach our dogs verbal commands, but many dogs learn to understand words we haven’t purposely taught them. We may find ourselves saying, “Let’s go for a walk” as we pick up the leash. The dog first associates the leash with the promise of going for a walk. He may also pick up on the word “walk” without his owner making a move toward the door or picking up the leash.
A delightful mutt named Midnight was very tuned into when his family was about to go on a trip to Arkansas to visit grandparents. This was the most exciting event in the world to Midnight because it meant a long car ride and upon arrival, a huge pasture to run in, and cows to boss around (he felt he must protect the family from those giant beasts.)
Midnight would know that a trip to Arkansas was eminent the day before when suitcases were being packed, and would get very anxious. When bags were taken to the car before dawn, he would go insane barking and jumping at the front door. His family attempted to pack in secret, but he was smarter than that. He started picking up on plans for a trip just through the family’s conversation about it. The words “trip” or “Arkansas” would set him off. The kids were told not say those words around the dog.
On one such trip, he actually got out the door while the family was loading up and went straight to the car, sat in his designated spot and didn’t make a sound. The humans felt really stupid. After that, each trip started with saying to Midnight, “Want to go to Arkansas?” and letting him out to the car. Midnight would sit, quiet and content, while the family packed the car in peace.
Astute owners who notice their dog’s linguistic talent have tried to develop it further by teaching words rather than commands. Some dogs are able to find their ball when the owner says, “Where’s your ball?” Some dogs appear to have an extensive vocabulary and can follow detailed directions like, “go to my desk and bring me my pen.” While this ability astounds dog owners, and anyone watching, scientists have tested dogs who show such prowess, and the findings are less or more impressive, depending upon how you look at it.
Dogs can learn many words, without a doubt, especially names of objects or commands. But to follow more complex directions, dogs rely on other skills. According to Stanley Coren in How to Speak Dog, a dog will listen to your words, and watch your subtle, even subconscious body language, and then add his most reasonable guess to figure out what you want him to do.
In the above command, for example, the dog may know what a pen is because his owner taught him that word-object association. The person giving the direction made a subconscious glance in the direction of the desk, which told the dog which way to go. Most dogs are masters at reading body language. The dog goes to the desk and sees the pen. The most reasonable and obvious thing for a good, well-trained dog to do with an object, is to retrieve it. This creates a very convincing illusion that the dog understood English well enough to follow a complex command.
In How to Speak Dog, to test the theory that dogs rely more on our body language than words, a dog was told to go to one place, but the person speaking glanced in a different direction. The dog always went to where the person was looking.
Dogs may never have a complete command of our spoken language, but their ability and interest in listening to our words and observing our body language in order to do what we ask of them, to ultimately please us, is really truly impressive.