Every writer has their own methods of revision/editing/rewriting. My novels typically go through a few drafts (one went through four and a half before I gave up on it) and this is the process once I have a complete draft:
Revision: To me, revision is reading back through the story and planning how it should be rewritten (or if it should be rewritten at all – maybe it’s fine as is, but this rarely happens), deciding if character relationships and/or personalities need to change, and other big-picture stuff like rearranging scenes and events in the story. It’s not technically writing for me.
Rewriting: This is actually writing the story over again according to the plan established during revision. Of course, an awesome idea might come up during the rewrite, which means that nothing in the revision is set in stone; it just helps to have a thorough guideline.
Editing: I consider editing to be the small-scope stuff: sentences and paragraphs, grammar, spelling, etc. I know some people differentiate between line editing and developmental editing, but my developmental editing is revision.
After editing, it’s time to let others read it and get some second opinions. In real life, I don’t know any writers at all, but there are plenty of awesome people online, so why not trust a “stranger” with my “masterpiece,” haha! I go through that process until the novel/story feels good enough. Yes, it’s a long, time-consuming process and one that does not lend itself well to instant gratification. Not many people seem to understand that. A great book can seem like it was written without a flaw or a hitch in the process, and that is most definitely not the case!