Also noteworthy that this is a human-made species that has been at our sides for thousands of years.
The "dumb" ones have been bred out, basically. The more astute of the species have been kept and used to produce more offspring. Thousands of generations of "pick of the litter" later and here we are.
I think I read somewhere that research says something between 20 and 100 words is fairly common for dogs to to understand.
So, to a degree I think that they can understand language. But also they have been with us almost as long as we have been us. They don't exactly have hundreds of thousands of years of genetic memory working against them either. We still have our lizard brains, and they their wolf brains. They don't, however, have the wild-heart genetics that wolves or other canids like hyenas have. Those traits have been bred out. Notice few wolves are truly domesticated. Even fewer hyenas. Probably NO other canids could be more than "trained" and surely not domesticated as pets.
Dogs are very pliable and teachable. For the most part, they are around humans from birth. They learn to read us and figure out our behaviors. We show our teeth and it's positive... they learn that. What does it mean when a dog shows their teeth? How many cats even grasp the concept when we point to something? Dogs get it.
Anyway that's my "watch a lot of tv" thoughts from my think-im -sciencey- brain.
Carry on.