I took some pictures of my dog licking a lollipop, and upon closer examination after uploading them to the computer, noticed what looks like possible digital distortion - white or otherwise overly-light pixels concentrated around the area of the nose. Here, and again here (look at the tongue.) Are those white speckles simply light from the flash reflecting off of water or wetness on the dog, or is this a problem with my RAW processing software, an issue with the camera (D70) or something else?
IANA Photographer but that all just looks like natural wetness to me.
I am a photographer, and yeah, looks just like a reflection to me.
IAAP.
Looks like specular highlights to me. Easily deleted with a little cloning, if it really bothers you.
The actual problem is that you pixel-peep too closely. At the size these would be printed and viewed, they’re not an issue.
Yep. Natural specular highlights/reflections on his wet nose & tongue.
Do you know how hard it is to pull off something that convincing in CGI? And here you are wonder if it’s an artifact! 
(Nice pic too.)
I will say, there might be some sharpening algorithm going on. These work by increasing the contrast between the light and dark pixels around edges. So, since the speculars are so bright, there might be a process going on that is darkening the contrast of the pixels surrounding it in proportion, which might make it look a bit artifact-y or post-processed.
I think it’s just the standard JPEG compression combined with the use of a flash. Although there may have been additional USM added during or after the RAW processing, which would, as you say, contribute to this effect.