My dogs understand about 200 - 300 commands. However, do they understand exactly what I'm saying? I guess that depends on what you mean.
Dogs do understand vocal tone. So if I'm angry, even if I don't use words they know, they can tell by the tone of my voice. If I'm happy, even if I don't use words they know, they can tell by the tone of my voice.
Also what most people don't realize is that dogs are KINGS of non verbal communication. Even the slightest lowering of your shoulders when you are discouraged or sad is read by your dogs. Everything from the slightest movement of a finger to how wide your eyes are can be read and interpreted by your dog.
In agility, where we are guiding our dogs around an obstacle course at squirrel chasin' speed, they can read in a millisecond when we ask for a change of direction or speed or ask for collection, etc. Most of the cues are non verbal.
So if I'm "talking" to my dogs about a bad day, sitting on the sofa with my shoulders dropped, a sad look on my face, my voice sounding sad, they would have no idea exactly what I'm saying. But they would easily know I'm sad.
Now if you drop in a command or two they know, it will clear things up even more for them. So let's say I'm sitting on the sofa talking to my dogs about how beautiful it is "outside," and how I'd really like to go "outside" in this lovely weather and "play" "Frisbee" and possibly later some "agility." Well, every word in quotes is a cue to my dogs. They absolutely know then that I'm talking about going out to play some of their favorite games!!!
The more you interact with your dogs, the better they become at picking out words and emotions. When you think that we, the supposed smarter beings, are asking THEM to learn to read us and speak our language, it's quite amazing what they do. I mean, shouldn't WE learn their language? (BTW, you can learn their language, and it is very fascinating after you do. :)) They are incredible animals!!