Rabies virus usually enters the dog's body through a bite wound inflicted by an infected animal and then replicates in muscle cells near the entry point.
Over a period of days or weeks, the virus spreads to motor nerves (which regulate movement of skeletal muscles) and then heads for the central nervous system. (Post exposure rabies vaccinations are effective only if administered before the virus reaches nerve cells.)
The virus replicates further in spinal cord nerve cells and then spreads throughout the nervous system causing progressive paralysis and eventually leading to coma and death. When the virus enters the brain, the notorious "mad dog" behavior begins.
If and when the virus reaches the salivary glands (often at about the time the central nervous system), it can be transmitted to other animals.