Great question! Many animals have what are called homing instincts. This is the ability of an animal to find their home from very far away. Some animals use landmarks that they recognize like roads, mountains, rivers, and even familiar smells to find home. Many animals actually have a built-in GPS system in their brains!

Magnetized cells in their brains use the Earth's magnetic field to help them tell which way is North. Other things, like the location of the sun during the day and the stars at night can help guide animals home. Animals that live in the ocean even use familiar sounds to help them find home. Most animals, including dogs, will usually use several of these methods at once in order to find home.

As humans, we do not have magnetized cells in our brains (or at least we haven't discovered any yet), so we had to rely on other things like landmarks and the position of the sun and stars to figure out which way to go until some smart people figured out that we could use magnets in a device called a compass to tell us which way is North.