I have read that some of the Border Collies have a vocabulary (at least as far as understanding the word) of over 100 words. I don't know if that is true, but I know that they certainly can understand a lot of the commands that they are given when they are trained for herding. I remember seeing a video of one that had been trained to go and pick up certain toys, and everything the trainer said; that dog would go and get the right toy and bring it to her.
I have also read that some people think that a dog can pick up on mental images in your mind, and they say it is always good to visualize whatever you are telling them. I had a friend do this when she was training her dog, and she was positive the dog understood when she used the visualization technique.