Last week I had the privilege of dog-sitting a delightful one-year old dog named Roxy. Roxy has wonderful dog-to-dog social skills. She is extremely playful but is not pushy towards other dogs. One of the things I saw her do several times during her stay with me was sniffing the ground as a calming signal to other dogs.
In the video clip below, you'll see Roxy (the tan one) playing with her friend Marlee (the black one). Marlee is the older of the two, and has a tendency to guard her toys from younger dogs. You can't hear it in the video clip, but what happens is that they run around playing for a few seconds, and then Roxy tries to grab a stick that Marlee had been chewing on earlier. Marlee lowers her head and lets out a quick growl to say "Mine! Back off!" Roxy backs off immediately, and then starts sniffing the ground as if to say, "I'm not a threat. Don't worry." It's also possible that Roxy is sniffing the ground as a displacement behavior. When dogs are a little stressed or uncertain, you might see them perform a familiar activity such as sniffing or scratching, except that the activity will seem out of place in the situation.
On another occasion I took Roxy to the mini dog park within my friend's boarding facility Bow Wow Bungalows. As soon as Roxy walked into the dog park, a pack of ten or so dogs crowded around her and started chasing her around to sniff her butt. Roxy felt a little intimidated by the pack of dogs, so she started walking around the dog park and sniffing the ground. In this case, I could tell that she wasn't just doing investigative sniffing, because her body was stiff, her back was curved, her tail was almost tucked, and she sniffed obsessively for a while without lifting her head. After about 3 minutes, all the dogs became familiar with Roxy, and she turned into her usual self - a social butterfly.
Canine body language and signals are often quite subtle and easy to miss. It's a great idea for dog owners to educate themselves about the language of dogs so that they can recognize when their dogs are feeling stressed, happy, threatened, curious, etc. There are lots of good DVDs and books out there. Two books I highly recommend are Canine Body Language - A Photographic Guide by Brenda Aloff and Canine Behavior- A Photo Illustrated Handbook by Barbara Handelman. For video, I recommend Sarah Kalnajs' The Language of Dogs DVDs.