I do think they are aware that there are differences between dogs. We live on a cul de sac with lots of other dogs. Rhett barks at each and every one. The only exception is another yorkie who could be his twin. Instead, he will sit there and watch him through the window. It's funny to watch sometimes. We aren't sure if its because he realizes that Tucker is another Yorkie or if he can't figure out how he is seeing himself outside