My older dog, Sydney , has always acted that way ! That's why her name is Syd Vicious
From the time she was a tiny pup she had a
fierce growl and hunting /stalking behaviour. In fact I was freaked out by it and actually asked her vet if she was going to grow up mean and crazy ( It was our first dog and I was a little freaked out) The vet told me all terriers have a good growl when they want and she wouldn't be crazy or mean
Her favorite toys are still "dead" rabbit/ fox/ squirrel type toys. She will play for hours acting like she hunted it
But she is never aggressive towards any of us and will let us just walk up and take it from her. I think she just enjoys it. She has never once acted that way towards anything other than her toy, Well except when she see's a rabbit in our yard . BUT when she does chase them ( and believe me she can catch them if she wanted ) she backs off and lets them keep running with her chasing , so I think it's just pure fun for her.
Thats my experence with it anyway