A hound or a dog?

I sometimes wonder why we call our canine pets dogs and reserve the word hound for a sub-group of dogs, given that the German word Hund is the translation of dog and The Free Dictionary gives the etymology I would have expected:

[hound - Middle English, from Old English hund; see kwon- in Indo-European roots.

This question came back to the forefront of my mind when I was browsing the archives of A Word a Day, and read this anecdote, which I've posted on my dog blog:

Our seven-year-old daughter Ananya has developed an interest in etymology. Often she'll interrupt her play in the backyard and peek in my downstairs study to ask about whatever word comes to her mind. Some time back she barged in with, "So how did the word dog came about?" I explained to her that the word dog came from Middle English dogge which came from Old English docga. Satisfied, she went back to her play.

I had completely forgotten about it when a few days later I overheard her talking to her grandmother on the phone, "Amma, we got a dogga." I was puzzled and later asked why she said dogga instead of dog. She patiently explained, "You know, Amma is old. That's why I used Old English with her."

Okay, that explains the word dog, but why has it prevailed over hound as the general term?

An article by Nancy M. Kendall in The Christian Science Monitor gives a clue.

For centuries, sportsmen have bred dogs for their tracking abilities. A "sleuthhound" was a dog trained to follow the track (sleuth) of a quarry in all weather. This Scottish bloodhound not only hunted game but also tracked down fugitives.

Aha! I was on the track (or slot, or sleuth), of my word origin.

And then...I didn't need to search any more, because I found a fascinating post about the underlying human-canine relationships that formed these differences in English vocabulary. It concludes:

It seems that hound and dog are not the same. The word dog implies common in every sense of the word. The word hound implies hunter and nobility. It seems that no creature escapes the class system in our society.

Basically the writer suggests that hounds were for hunting and dogs were for guarding.

Hmm...does that mean it's rather common to keep a dog as a pet? Yes, perhaps in more than one sense of the word, given the ownership rate of dogs. (37.3% of Australian families owned a dog in 2006.)