All about balancing the ledger. Even amounts of money on both sides equals guaranteed profit for the book.
As to why some dogs are bigger than others, its simple bias. Bettors love winners, long term winners (like the yankees in mlb) always command a premium, even when its not deserved. If there were no premium, action would be unbalanced.
Books generally know nothing more, just how to get their players on the side they need them to be on.
they generally dont know.
the sofisticated ones would have history statistics of sharp bettors (insider information etc) and if they see them all on one side of the match, they may suspect something. but in general - they dont really care, as long as they receive balanced action or hedge on betfair.