At the risk of alienating my fellow animal lovers, I have to say that, at a gut level, the concept of dog hair knitwear weirds and grosses me out. Just how many washings does it take to get that wet-dog smell out? What if you think that you got all of it out, and then you get caught in the rain, or maybe just sweat a lot, and the smell starts to seep out? Awkward!
I know that it's better to make a sweater from the waste product of your family pet than a sheep that was sheared against its will (not to mention how the sheep might have been treated).
Having said all of that, check out this photo gallery of people wearing clothing made from their dogs' hair.
There's a book, too -- Knitting With Dog Hair: Better A Sweater From A Dog You Know and Love Than From A Sheep You'll Never Meet.