Most of us rely on a handshake, an e-mail, or even a simple conversation, dogs on the other hand get to know other by sniffing each other's rear end. This defiantly would not go over well at the bar, however, with dogs, it's as common as a human asking another for directions or the time.
So why do dogs sniff each other's rear ends? The best way to summarize the reason is that dogs have one of the most powerful sense of smell in the animal kingdom. By sniffing another canine's rear end they can obtain numerous amounts of information. They detect pheromones to determine if another dog is angry, scared or friendly. This information allows them to make a decision weather the dog is friendly to play with or to bark and or retreat. Dogs have been known to do the same for their owners as well. Although dogs aren't sniffing their owners rear ends, a simple sniff allows them to anyalize the pheromones we emit so that our canine(s) can understand our mood(s).
Personally I prefer a handshake.