Toddlers and the meaning of LOVE

Here's a trick my daughter has been using recently to get out of bed at night and prolong actually going to sleep:
She comes to my husband and/or me and says, "I has ta give you 'nother hug and kiss," and adds "I love you, daddy/mommy."
Oh, she's a genius alright. How can you get mad at that display? It's just so frigin' cute!
But, it made me wonder. At three-years-old is my daughter simply mimicking or does she understand "I love you?" It seems she must understand the phrase in order to use it to her advantage? And if it's true you learn by example, she gets plenty of snuggling, hugs and kisses and "I love yous" to see and feel a connection. Plus, she sees how worried I get when she doesn't look both ways before she crosses the street and hears the correlation; "You have to be more careful crossing the street and always look both ways. Mommy loves you and doesn't want you to get hurt." (I could list several similar senarios) Also, I try to reward her for good behavior and show extra attention and affection. Bad behavior means time out and little to no attention from me. It didn't take long for my daughter to realize she gets attention when she behaves whether its sharing, cleaning up, being a good big sister or using her good manners. Or getting out of bed to give hugs and kisses and say, "I love you."
Now I wonder, how she wouldn't know the meaning of LOVE...