
Line-breeding is where you mate dog and bitch who have common ancestors three or four generations back, and is the system used by the great majority of successful breeders.
Line-breeding (and its more extreme form, in-breeding, where you get father/daughter, mother/son, half-brother/half-sister matings) cannot create problems. It can only highlight what is already there. For example, if both parents carry a recessive gene, they won't outwardly show that they have it. By mating them together you are doubling up on it, and the recessive comes to light, showing that both were carriers. Once you know that, you make sure not to mate either of them to another carrier.
It can also 'fix' good points as well as bad, so can be a very useful tool in breeding quality animals, but is only recommended for the very knowledgeable person, for whom the animals in the pedigree are not just 'names', they are known individuals, with all their characteristics known.
Out-crossing, where dog and bitch are unrelated, is a complete gamble, and tends to produce, at best, mediocre dogs, especially if it's done repeatedly, generation after generation.
Mutations are entirely unpredictable, and can occur with any mating, whether in-bred, line-bred or out-crossed