For the same reason we name anything, to communicate. Giving our pets a name makes it easier to talk to and about them (especially if you have multiple pets).
They know to respond to their name because they’re capable of learning and the fact that every time they hear a certain sound (their name), their owner is paying attention to them teaches them to react to that sound.
I wanted my dog to learn his name as soon as possible, so I actually clicker trained him to look at me when I said his name. Attention + treat = a very good reason for him to always look to me as soon as I say his name. Even without specific training though, a lot of animals can put 2 and 2 together like this.
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