Before a manuscript is sent to an editor, many authors use beta readers. They read the manuscript, and give general reactions to it. A beta reader does not edit the book, nor proofread it. A good one saves enormous time and money on editing and proofreading, and gives the author the most important reaction: that of the eventual reader.
I do beta reading for a few well-known authors, all of them friends. I am brutally honest with the authors, because hiding what I perceive as faults is no favor. I told one that the character “Smith” was obviously intended to suffer from bipolar disorder (he was). The symptoms he had displayed in the first, already-published, novel were inconsistent with the disease, but fully consistent with intermittent explosive disorder, a rarer, but more dangerous condition. She wasn’t happy, but took five full days rewriting the character anyway. I have pointed out errors in terminology, geography, dialog and medicine to authors, all of whom have thanked me.
Self-published authors usually use friends and family, who read for free, and typically tell the author the book is great. I want honest reactions, and hire beta readers among acquaintances I can be sure to be honest. I ask beta readers specific questions, such as
Can you follow the plot?
Are the characters and dialog believable?
Are scenes and actions credible?
Will anyone care about any of the characters, or have some other strong emotion?
One reader just returned a beta read of Four Seconds on the Clock: College Freshmen, and pointed out inconsistencies with reality that would ruin the story for the reader. She was correct. I’m currently rewriting major parts of the manuscript to conform with reality. Better to delay publication by two weeks than to publish something readers won’t enjoy.
If asked to be a beta reader, the best thing you can do for the author is to be honest, brutally so if necessary. It is better for the author to learn of problems before publication, than to publish and receive scathing reviews.