We became distinctly human-like over 5 million years ago and the gray wolf first appeared around 1 million years ago. The dog appeared less than 50 thousand years ago.
Predators tend to avoid people and some of the dog’s ancestors moved into the area surrounding us. Then came an unusual genetic occurrence. These individuals developed a talent for creating successful mutations resulting in an incredible number of variations in most of their characteristics. Dogs are evolving very rapidly and it most likely began before changes in their ancestors resulted in them becoming distinctly dog-like. So they responded to intense selective pressure by adapting from a wolf-like animal into a species that is acceptable and useful to people, a very successful direction. Breeders learned how to use inbreeding and they converted already very compatible and athletic wild dogs into a wide variety of working breeds. Domestication is the story of selectively inbreeding a highly evolved, naturally compassionate, and genetically diverse dog; not the conversion of a wolf into a dog. It is the ongoing process of breeders identifying and recombining all of the naturally occurring physical and behavioral variations possessed by dogs.
Evolution interacting with natural selection, from a genetic perspective, results in the most successful variation of a characteristic becoming dominant while less successful versions are stored as recessives that occur occasionally, where success is measured by the ability to survive and reproduce. Behaviors are inherited in a similar fashion to physical characteristics. An individual dog that doesn’t carry the typical dominant gene for a characteristic will display a recessive version and if beneficial for our purposes then we selectively breed it. If we breed that individual to most dogs the trait will not reappear in the puppies, being masked by the dominant version from the other dog. But if we inbreed the dog some of the offspring will carry only the recessive version and there will be pups that display it. Recessive characteristics occur naturally with a low probability and inbreeding dramatically increases the probability of them being expressed. Selection and continued inbreeding for desirable recessive genes can result in all of the offspring displaying them. Linebreeding, breeding to more distant relatives, results in a lower probability of the recessives recombining than inbreeding, and successive linebreeding will not usually result in litters where all of the pups express the recessive characteristic.
Inbreeding is extremely valuable in creating working dogs. There is no other practical method for uncovering a recessive characteristic that refines a purebred dog, then combine it with other desired characteristics and stabilize them so that they are passed to their offspring reliably. It is the strategy breeders use to get all of the characteristics you want into one dog and a lot of the traits that characterize different breeds had recessive origins. Without inbreeding as you try to bring in new traits other desired traits will often be lost and progress is extremely slow. Inbreeding can be misused and it has unwanted side-effects.
I think it’s useful to compare the situation we have with coyotes in North America. We don’t have very many wild dogs and coyotes have moved into the places they would have inhabited in the past. There is not a lot of diversity in coyotes, in either their looks or actions. There’s no indication of them becoming more approachable, no domestication occurring, and no one is turning them into working coyotes.
Without the diversity of the dog and our ability to manipulate it the dog would be little use to us, so I believe inbreeding strategies have played a crucial role in our acceptance of the dog into society.