Do pets really know their own names?

Most dogs and cats and also many other mammal can be trained to react when you call their names. One simple example is when you call out to your dog or cat, they will come over or follow you. Many people assume the pet animals in fact know what their own names are. Do they?

Another theory is the pets only reacted because they are used to react to a certain sound - in this case the words you gave to them as names.

Do you believe the pets truly understand what their names are? or are they just following a sound pattern as order?