Contrary to waht otehrs ahve said, dogs are not stupid.
Yes, they know you are another mamilian animal.
Yes, they know that you have fabric or other material over your skin.
Yes, they know that you jsut took it all off your skin.
Yes, they know that those are your genitals.
For the most part, they won't care. they're naked all the time, after all, and they can see the genitals of other animals allthe time, generally. you are no different. they likely think it more peculiar that you cover it it.
They may be more interested when you underss because when you're naked they will be able to smell you, in particualr your scnet, more clearly.
For the record, if you are having sex with your significant other and the cat or dog is in the room, Yes, they know exactly what you are doing. They aren't stupid. Equally so, they understand what you're doing when you fly solo around them.
The amount of interest they show will depend on their personality and their perceived relationship to you and/or your partner. That will be as individual as the pets themselves.
Personally, I don't find either of these things weird or stange, the same as I have no reservations being nude in the company of my other family members. My pet dog is my pet dog; it doesn't matter if he's watching me while I change, or seems fascinated by what I'm doing with my fingers between my legs in my own bed... I'd definitely be flustered and perturbed if my brother or father walked in and saw me in the latter position (naked is one thing... that is quite another), but I don't mind my dog watching.
-Harla