My 14-month-old daughter still has a fairly small spoken vocabulary ("ball", "shoe", "no", and "bye"), but she clearly understands a lot more than she can say. The first time I saw evidence of this was a month ago, when we were playing with a toy of hers that rewards simple actions---pressing a button, turning a knob---with plastic animals that pop up. As I identified one of them as "giraffe", she suddenly got up and retrieved her stuffed giraffe. She's since showed us that she knows "balloon", "book", "block", and a few other common items.
This evening before bed we were reading a book with pictures of baby animals. I wasn't surprised when she responded "meow" to my identification of the cats, but I didn't understand why "pony" prompted her to keep patting herself on the top of her head. Then I figured it out: she was fingering the location of the ponytail I had just removed!