Just read this on reddit, never heard about the dogs:
They brought two forensic dogs into the apartment, one at a time.
One was trained to alert only to a gas produced by human corpses (cadaverine). It alerted to a part of the floor near a sofa and a window in the living room, and to a shelf of a cupboard in the parents' bedroom.
The other was trained only to alert to the smell of human blood. It alerted to the same two spots.
The Portuguese head investigator theorised that sometime after the little girl was seen in the afternoon, and when the mother came running to the tapas bar shrieking 'They've taken her, they've taken her!', she fell off the sofa or the windowsill, and hit her head on the floor, and died. At some time after that, the body was taken and concealed in the cupboard in the parents' bedroom while they were pointing everyone in the direction of an abduction. At some point after the alarm was raised, and when the entire flat was first properly searched by the police, they moved the body somewhere else.
Since the dogs also alerted to the interior of the hire car - which the McCanns had not even rented until long after the 'night in question' - the theory goes that they subsequently took the body from where they had hidden it, put it in the car and then disposed of it during one of the many trips they took in that car.