Pavlov hasn't really been a thing in neurology or psychology since the 50s. Lets get that clear before we start spouting grossly outdated theories before we really screw up and start spouting freud.
Dogs do analyse our facial expressions and the like to guage our moods. But its also how humans do it as well. We know that because people who cant, namely people with autism, suffer from something called "mind blindness", the inability to guage the internal states of others.
The thing is, we can only guess at what animals can't understand, because they can't tell us otherwise. But we also need to acknowledge these animals for the large part have the same brain parts we do (with a few notable exceptions, like an inability to process grammar) and often display similar reason to us.
We know they tend not to be as smart as us. We've got whacking great big frontal and temporal lobes, but we need to be very careful in assuming they dont understand us, just because they are mute.