Here's a video you might want to watch. This is crochet, but it will show you how to make a simple dog sweater. This is a rectangle. You measure the dog's neck. Cast on that number of stitches and just knit a rectangle until it reaches the length you want. You sew up one or two inches at one end for a turtle neck collar. The rest drapes over the back of your dog or you can attach ties or buttons to this.
http://www.youtube.com/watch?v=khVnUsDx6Mw&feature=plcp