There are several layers to editing a book, and each one of those layers can be worked on by a different specialist editor—although the author is usually consulted at each stage and asked to agree to and implement all the changes suggested.
The first layer is the revision that writers do to their own texts before submitting their work.
The second layer is usually line-editing or structural editing, which focuses on the big issues to improve things like characterisation, structure, pacing and plot. Structural editing is a two-sided process: the editor works through the book and produces a list of editorial notes and suggestions which point out any weaknesses and important revisions; that report is then sent to the writer, who has to make all the changes required. If the writer doesn’t agree with some of the changes suggested he can refuse to make them: but it’s far more productive if he makes alternative suggestions for fixing the problems. It is sometimes necessary to take a book through more than one round of line-edits.
The third layer is copy-editing. A copy-editor is a pedantic, nit-picking creature who gets her hands on a manuscript once it’s been through the line-editing process. She is responsible for finding smaller mistakes and suggesting corrections for them: she will look for misused punctuation, typos, spelling mistakes and grammatical errors; she’ll also keep watch over details like everyone’s eye and hair colour, the sorts of cars everyone drives, and their favourite drinks. She checks that all factual information is correct, and ensures that all references and citations are properly given. So, where line-editing is concerned with the big stuff, copy-editing focuses on getting the details right.
Both copy-editing and line-editing work with books in manuscript form, printed on separate sheets of paper. These two tasks are now often combined into one, and are the responsibility of just one editor, which is a worry: the more people who check over a book, the more chance there is of errors being spotted and corrected; but with publishing cutting costs at every opportunity this is not always possible now.
Proof-reading is the final stage, and involves working on the galleys or galley-proofs—the unbound but printed pages of a book, with page numbers, illustrations and final typesetting in place. They are always checked for design, pagination and colour balance, but it’s becoming increasingly rare for them to be properly proof-read: some publishers do only the minimum of work at this stage in a further attempt to cut costs but this can result in some very expensive mistakes: if a major error is found after a whole run of books has been printed it’s likely that they will all have to be pulped and reprinted, at the publisher’s cost.