Dogs that are siblings can be bred together to create a litter of puppies. As dogs grow up, they do not differentiate as humans do about who is genetically related to them. Sometimes, breeders intentionally breed siblings with each other to isolate a specific trait by limiting the potential gene pool in favor of that trait.
There are also disadvantages to in-breeding dogs. In many cases, by using the same genetics, not only can the favorable traits be isolated, but the recessive genes are also doubled. It also increases the chances of developing defects like diabetes, hip displaysia and glaucoma.