After your manuscript is in its final form and has been "handed" over (everything is electronic now, no recluses typing on a Royal these days) to the publisher, it begins the wild adventure that is production. This is my specialty.
The acquisitions editor (the one who sought you out and paid you for your work) actually has the manuscript in his/her possession for about a week or two after officially accepting it as complete. The AE gives it a once over and prepares a memo for me, the project editor, with any details, oddities/preferences (such as "the author hates the term 'googled'—please make sure the copy editor refrains from using this"), and considerations for improving that particular book. I then translate this information to the copy editor in my own memo after checking the file for any formatting issues and verifying consistency throughout.
Copy editors are almost always freelancers. Some of the large houses employ full-time copyediting staff, but generally it is much more cost effective to pay on a per project hourly basis than it is to offer a salary and benefits. Not to mention the fact that a copy editor wouldn't necessarily have a steady stream of work at all times due to the standard publishing seasons (Fall [Aug-Nov] and Spring [Mar-June], sometimes Winter [Nov-Feb]). A copy editor is allotted a timeframe of between three and six weeks for most manuscripts.
And, if you are curious, copyediting fees are generally calculated using a formula considering standard hourly wage [$22-35 per hour], level of edit required [light, medium, or heavy], and the number of pages/words. A pretty average project might have a $1,250 copyediting budget for a 325-page book. With a medium-edit rate of 7 pages per hour, this job is approximately 47 hours of work. This example pays out about $27 per hour.
Given that I will know your manuscript is coming down the line at least a couple of months in advance, I use that time to decide on an appropriate copy editor (one who specializes in your subject matter, is skilled with fixing a particular weakness, etc.) and offer her the job (for the sake of simplicity, I will use "her" here as the vast majority—say 90%—of freelance editors are female). I let her know what level of edit I expect, the fee I can offer (which the AE determines), the expected delivery dates, and other expectations for the job.
When the AE does transmit the files to me, and I have reviewed them I email the copy editor my memo and the manuscript document(s). It is then out of my hands until several weeks later. Often I will get a few initial questions from the editor as she does her first read-through, but otherwise I put the book out of my consciousness until the deadline and focus on my other projects.
Coming up... first author review