This information regarding water dogs was emailed by a forum visitor.
A water dog is a term used by the fire lookouts and, presumably, others in the profession, to describe a cloud that looks like smoke.
When you are in the tower looking down in valleys and, especially campgrounds, very early in the morning, you might see a cloud that looks like a "smoke". But it is formed by water condensing during the night and hanging above the valley, but lower than the peaks.