This quote comes from one of the only, if not the only (aside from Half-Life 2's Alyx Vance), video game companion that never becomes annoying or troublesome to gamers. One of the most recurring problems in any video game is that of trying to create a companion in a video game that can tag along with a player character's exploits throughout a game in a fashion that is not only realistic but, more to the point, doesn't require constant babysitting to avoid the common video game companion pitfalls of getting stuck, going the wrong way, or committing suicide in one of any number of possible ways depending on the hazards that fill a game world. It's an understandably difficult game mechanic to have in that, especially in an intimate single-player game experience, to have an AI intelligent enough to act predictably "human" in the same way that the person controlling the main character would act.
This quote is arguably the most memorable thing that players will experience in all of Lionhead's recently-released Fable 2. It doesn't come from farting to impress women to the point of marrying you. It doesn't come from the manual or various cinematics. It certainly doesn't come from the wooden and awkwardly-presented narrative cutscenes. No, the above quote comes from -- and I'm sure this is a surprise -- the only dog known to the world of Fable 2: the player's dog that can change names as often as it changes collars (no, really). The little furry fella attaches himself to the player's character from an early point in the game and, from then on out, is by his side throughout a majority of the rest of the game. The dog is not the interface but, instead, a helper to the main character; he will point out treasure chests, dig spots, and he will help in combat from time-to-time.
Though, what the dog adds to Fable 2 is not really related to his gameplay functionality. Such a large part of the game is based around a concept of community; the player aims to either impress or strike fear into the randomly-named denizens of the various towns and, at some point, get married and impregnate (or get pregnant) to some of them. The player interacts with the game's townspeople by a little expression-based minigame where a particular expression is chosen from a radial menu (dancing, flexing, farting, etc.) and then "held" via a semicircular bar with a constantly-moving indicator that needs to be released at just the right time for a maximum impression value that affects every townsperson in the immediate vicinity. This gameplay mechanic makes for some entertaining situations from time to time but not only is it very gamey but it is also an incredibly unnatural and bizarre way to interact with people who spit out their limited amount of voice acted lines.
And so the onus of player/game emotional connections falls upon the canine of Fable 2 and, throughout the entirety of the game, he succeeds. The dog's interactions with NPCs ends up being far more realistic and understandable for every human gamer controlling Fable 2's "hero" and, meanwhile, it is the player's connection to the dog that grows with every new situation that the player/dog combo comes up against. When a player enters a cave the dog may start acting timid and frightened and move at a slower speed to the point where the oft-oblivious player may wonder where his dog is; upon looking back, there is the normally-friendly and perky puppy face now cowering near the ground while his legs shake as he trots slowly towards the player. If the person playing the game isn't heartless, he can use a dog treat expression to throw a treat to the dog as if to say "It's all okay buddy" and the dog will perk back up and stick by your side through the dungeon. The dog can also get hurt in combat and will whimper with every step he takes until he received a "Dog Elixir" which sound, roughly, as sad as it is to see.
The importance of the dog to the player becomes clear at three key spots throughout the game; one of which is early on and occurs a bit too soon to really have much of any emotional resonance with the player, but there is one event midgame that plays out after the player character has been absent from the world for a good chunk of time. Once a narrative sequence has played out in its normal filled-with-awkward-pauses fashion, a character says "Oh, and there's someone who has been wanting to see you" and the dog, which now greatly reflects the player character's alignment (bad dog ends up like a hyena and a good one like a golden retriever), comes bounding up a bridge and jumps up at you for a doggy hug. One of the NPCs involved in the sequence goes on to point out that the dog came to this spot in the game world once every week while the player was absent in anticipation for his return. It's a throwaway line in terms of the main story arc but it is, without a doubt, one of the most potent lines in the game. Next to "Ruff, Ruff!"
Functionally, Fable 2's dog is a negligible piece of design that had his most useful features seemingly shoehorned into the experience to justify the dog's existence as anything but window-dressing, but as an enjoyable and completely harmless companion for the player as he makes his way through the duration of the game the dog is an absolutely superb feature of the game. The dog takes nothing away from a theoretical dog-less Fable 2 game experience but it adds a layer of natural interactions and human/animal companionship that, really, is unmatched by anything else in Fable 2.