Although the reader is never really sure that Shmuel knows that Bruno is the son of a Nazi commander, Shmuel certainly knows that Bruno is German, fairly wealthy, has no Jewish heritage, and lives on the other side of the fence. (In truth, a nine-year-old might not always be clear about his or her father's exact job.) Yes, Shmuel is always friendly with Bruno despite knowing these things. For example, when Bruno and Shmuel speak (with the fence between them), Bruno often says things that reveal his German pride. When Bruno finds out that Shmuel is from Poland, Bruno immediately replies that Poland must not be as good as Germany just because "We're superior." Bruno immediately admits this "didn't sound quite right" and remains silent because he doesn't want to be unkind to his friend. Shmuel acts the way he always does when Bruno acts with German superiority:
Shmuel stared at him but didn't say anything, and Bruno felt a strong desire to change the subject.
Shmuel simply stares and says nothing when Bruno behaves in any way befitting a Nazi. The irony is that, whenever Bruno does behave in this way, he immediately realizes there is something wrong about it. Shmuel simply allows Bruno his reverie about his behavior and then continues the conversation as friends would.