My dog, a Chihuahua/Boston terrier mix has always lifted her leg to pee. People will stop me & ask after they see her pee--is that a girl dog? She is always in pink or purple harasses. And tell me that they haven't seen that before. She was a stray we found on our street after a bunch of really bad storms & she had gotten out of her yard. We found the neighbor she had belonged to & he asked us to keep her because he was a full time student & his parents really weren't able to care for her. She had been raised with her brother & unfortunately, he was never found after they got out.
I have never had a small dog before & some of her behavior freaked me out when I walked her, like the fact she would take on EVERY dog we walked past, no matter how big! We went to a trainer & found out how to deal with that & the trainer also told us that the leg lifting was because she was a dominant dog. After we had her spayed, I thought she might stop that, but she didn't. She did mellow out toward the other dogs, but the trainer also told me to NEVER, ever pick her up when walking her. Instead I hold her closer to me by her leash & either we keep right on walking or if the other dog/people are agreeable, we let the dogs sniff, etc while we talk & then move on. And she will pee on that dogs spot. Every time!
BTW, when she is in our back yard, she just pees normally. But on our walks, every bush is sniffed & peed on. So your dog is a dominant dog, showing her dominance to every other dog that is out there. Rare, but not unheard of. And she was probably kicking butt in the shelter before you found her!
Wow, always wondered why my dog did that kick after she peed!