Once the final draft of the manuscript is approved, it goes for copy-editing. There would be little point copy-editing the initial draft, as whole sections are likely to disappear and entirely new sections appear during developmental edits, so no one is going to pay $60 an hour to keep re-copy editing the same manuscript. Copy editors catch typos, spelling and grammar errors, inconsistencies, and so on. It is a highly technical skill, takes a certain personality, and is often underrated. A typical example: I used 'global change' to change a character in one of my stories, but unknowingly had Word set to "changes from here down" rather than "all document" so that a minor character was one name in the first scene, and a different name four scenes later. Which, understandably, caused some confusion until caught by the copy editor.
The need for copy-editing is obvious; less obvious is that copyediting is not a substitute for development editing. Beginning authors who arrange to have their manuscripts 'edited' before submitting to a publisher, or self-publishing, need to be clear on whether they are hiring a copy editor or a development/structural editor. Freelance development editors (often marketing themselves as "writing coaches") can often be very helpful in identifying problem areas; over-coming writer's block; pushing authors to go deeper, to up their game; and turning initial drafts into submission-ready drafts. Copy editors can help authors avoid embarrassing typos and inconsistencies, but it is not their job to tamper with the manuscript's content.
Knowing which service one is contracting for is therefore crucial. When I was an acquisition editor at a small press, I several times had authors telling me they had paid thousands to have their manuscript edited before submission, but when I looked at it, the manuscript made no sense. Of course, the "editor" they had hired was a copy editor, who therefore hadn't pointed out that giant ants, say, are a non-starter, but simply tidied up whatever they had been handed. Heartbreaking, but it happens a lot. To educate yourself on the different types of editors and what each does, read the Editor's Canada definitions of professional skills here: https://www.editors.ca/hire/definitions-editorial-skills
Finally, there are a couple of trends in publishing that should be noted here. First, publishers at all levels are doing a lot less editing than they used to. Most of the major players let go between 30-40% of their remaining editorial staff during the 2008 recession, and there is no reason to expect any of them to rehire to the same levels in the future. The heavy concentration of publishing into a very few houses has created a situation where there are so many authors submitting to the same six surviving SF imprints, for example, that the majors can simply take the top 1% that need almost no development and reject the rest. Indeed, very few publishers these days have the patience to develop new talent, and simply do not accept unsolicited manuscripts. Instead, the slush pile has largely been outsourced to agents, who perforce have taken on the role of development editor. That even makes a kind of sense, given that most of the new agents on the market (and therefore the ones willing to accept new clients) are the very editors laid off from the major publishing houses. Same people doing the same job, the difference being that now their salaries are being paid by the writers, rather than by the publishers....
Second, copy-editing and proofreading have been partially eliminated as steps in the process by the change from hot lead typesetting to digital. Certainly, many small presses (and almost all self-publishers) simply take the author's digital submission and run it through a software package to turn it into the printed book. Given the expectation that authors will have already run spell and grammar checks on the document, the need to pay someone $60 an hour to go through checking for minor glitches is now sometimes seen as redundant. This is a wrong idea, of course, as is obvious whenever one runs across a book that hasn't benefitted from the attention of a good copy editor.
This column originally appeared in Writer-in-Residence: Common Sense Guidance for Writers by Writers, curated by Krista D. Ball http://writer-in-residence.blogspot.com/2011/03/editor-is-not-your-enemy-part-2.html