The earliest remains of the domestic dog date from 10 to 15 thousand years ago; the diversity of these remains suggests multiple domestication events at different times and places. Dogs may be derived from several different ancestral gray wolf populations, and many dog breeds and wild wolf populations must be analysed in order to tease apart the genetic sources of the domestic dog gene pool.

A limited mitochondrial DNA restriction fragment analysis of seven dog breeds and 26 gray wolf populations from different locations around the world has shown that the genotypes of dogs and wolves are either identical or differ by the loss or gain of only one or two restriction sites. The domestic dog is an extremely close relative of the gray wolf, differing from it by at most 0.2% of mtDNA sequence.
In comparison, the gray wolf differs from its closest wild relative, the coyote, by about 4% of mitochondrial DNA sequence. Therefore, the molecular genetic evidence does not support theories that domestic dogs arose from jackal ancestors.

Dogs are gray wolves, despite their diversity in size and proportion; the wide variation in their adult morphology probably results from simple changes in developmental rate and timing.

http://www.grapevine.net/~wolf2dog/wayne2.htm

I'm particuarly interested in their evolution from a physiological point of view i.e. a dogs DNA is said to be 99.8% wolf, yet we all know most look nothing like a wolf.