It’s a common misconception that dogs have ‘backward’ knees. In actual fact, their knees are exactly the same as ours – they’re just closer to the dog’s body, and the joints we are used to thinking of as their knees are actually their ankles.
Dogs, like most other mammals, walk only on their toes, not on their palms or soles. This is pretty clear when you compare the bone structure of a human vs. a dog. Here’s the front leg of a dog next to a human arm, thanks to WikiCommons:
And here are the full skeletons side by side (dog, human), except that I’ve coloured them so you can see clearly the similarities in them.