Dogs do indeed have lips. The pendulous upper lips in some breeds are called flews. In addition to their primary function of protecting the teeth, dogs' lips are also used to send signals via body language and to help channel scents to the nose.
Dog lips may be partially hidden from view by thick fur, but underneath they are similar in appearance and texture to human lips. In dogs, the lips run right along the gum line. Pushing them back reveals a good view of all the teeth; this is not true of all animals, such as rabbits. Dogs lick their lips when they are anxious. This signals appeasement and passivity to threatening animals or people nearby. The wrinkly flews of hound breeds such as beagles helps them pick up scent particles from the air.