For everyone curious, here is a great explanation of the difference between Rennen und Laufen:
When doing the exercises, how do we know which versions of the translation provided are acceptable?
Here the provided translations to Hund are bloke/bastard and dog.
Now I know that dog is likely to be correct, but I am also curious what using the other meanings will do.
In this case - how do we write "The bloke runs" or "the bastard runs"?
Is it just through trial and error?
Well, other writing. If you find the sentence in a novel for example, you will probably know if there is a real dog present in the scene or if the sentence means a guy.
Context means the surrounding of the sentence, the situation in which it is used. The more you know of this situation (if you see it, read about it and so on), the easier it is to decide which word fits best. if you just have a sentence like here on duolingo, you can only guess what is most likely.