They argued and fought, and claimed to hate one another. Camp was always a tense affair when the two were present due to the name calling or the tense, sullen silence. Zuko sat at one end of the fire, Katara at the other, glares flying over the flames.
Sokka took joy in the fact that the pair seemed to detest one another so strongly, being as how he disliked the banished prince. Toph was silent about the matter, refusing to involve herself in any way. Aang was surprised by Katara's hostility, and he attempted to offer friendship to the sulking prince. Iroh would just shake his head and note that Zuko never had always been intimidated by the female species, and intimidation tended to bring about the worst in him.
So that night, around the fire, everyone anticipated the harsh words and murderous glances that the pair sent each other. Everyone expected that Katara's face would flush with anger when she shoved Zuko's dinner plate into his hands. It was anticipated that Zuko would back away with an angry retort, his cheeks turning red with impatience at the Water bender's behavior.
Toph couldn't see the spectacle that they made of themselves, but boy, could she hear it. When the others saw the pair's hands make contact when Katara handed Zuko his dinner, they saw them shudder with repulsion. Toph, however, felt something different.
She felt Katara's heartbeat spike, and Zuko's vibrations intensify threefold. So when Katara muttered "I hate you," under her breath, she couldn't fool Toph. The vibrations she felt said something else. They said, "I love you."
And when Zuko mumbled, "I hate you too," Toph knew that he was just saying 'I love you' in the only way that he knew how.