It's a misused reference to a Sherlock Holmes story where Sherlock figures out who stole a prized race horse because the guy who slept near the barn said he didnt hear the dog bark the night the horse was taken, because the dog must have known the person who went in that night. Its used to describe some clue that seems unrelated or pointless that is actually key.

LegalSmeagle seems to think that it refers to a dog who didnt bark because its a bad guard dog or something? Not really sure what this morons point is supposed to be. Its a reference Midwits love because they think it makes them appear well read.