There some good dog smells in those holes...that's why.
Actually it probably goes back to what they were breed for. Hunting rodents....and rodents have burrows.
We live on the water and have muskrats. They have tunnels down at the water front...occassionally Ramsey will smell where a muskrat has recently been...and she's done her hardest to dig one up. Fortunately muskrat's must tunnel pretty far down...