[bash] Why does sed not replace all occurrences?

You should add the g modifier so that sed performs a global substitution of the contents of the pattern buffer:

echo dog dog dos | sed -e 's:dog:log:g'

For a fantastic documentation on sed, check http://www.grymoire.com/Unix/Sed.html. This global flag is explained here: http://www.grymoire.com/Unix/Sed.html#uh-6

The official documentation for GNU sed is available at http://www.gnu.org/software/sed/manual/