Dog owners will tell you that their pets understand language, but human language is a very complex subject. We know that dogs are very attuned to verbs and action words, but nouns are different, because dogs don't focus on objects the way people do. Conducting experiments is difficult as well, because dogs often only listen to their owners. Are they responding to a particular voice or inflection or the sound of the words themselves? And are we even reading their responses correctly?
A team of Hungarian researchers from Eötvös Loránd University in Budapest designed an experiment to see if dogs recognize the names of objects, controlling for both voice and reaction. To do this, they had to train dogs to wear electroencephalogram (EEG) monitors. That way, the dogs' reactive behavior, which varies, wouldn't be necessary. The spike in brain waves indicated a reaction. The upshot is that yes, dogs do understand the names of objects they are familiar with, even if they don't care about them. Read how they ascertained this at Ars Technica.
(Image credit: Boglárka Morvai)