What I call the triage edit is the biggest one for me. I'm a pantser, so I write from beginning to end without any kind of outline. This leads to plot holes, characters that slip in and then slip out again, as well as a multitude of other problems. Things that happen in real life, but they're "not acceptable" in writing.
For me this is the best way, even though it leads to more work after the fact. I like the fact that my stories are unpredictable, that the story develops as if these things are actually happening rather than that sense of deliberate construction that I get with many books.
The triage edit is the post-writing surgery phase, or the storyline edit. I read through the story, complete, once. I usually also hand it off to a reader at this point, if someone is available, because I literally can't see many of the problems.
I am getting better at that, but I'm not there yet.
After I've got the plot straightened out (or at least unknotted and the pieces welded together correctly) it's time to go back, fix the broken characters, put in missing scenes (I seldom have to take scenes out because the writing is so organic) or move them around.
Here's where I have to decide on the final "shape" of the book. Could one character's POV be removed or transferred to another more central character? Would a prologue be helpful? Did I start the book in the right place, does it need more or less backstory?
What about the conclusion? Is it satisfying? Does the climax follow the three-act crescendo, or is there a gap in the middle? These are all things we're used to in the books we read, and although we don't miss it in real life readers notice if it's missing.
When I'm done with this I read through it again.
I have to trust myself on this piece--I can tell that something's wrong, or something's missing, but not always what. I can see it in other people's writing, but not my own. If I feel something's wrong, I'm right. So if necessary I pass it off to another reader.
Once I feel comfortable reading it all the way through, it's time for Edit 2.