Developmental editing is sometimes called content editing, substantive editing, or story editing. The focus is on the big picture, not on sentence-level concerns although we may make sentence-level edits to address the big-picture concerns.
For fiction, a developmental editor looks for problems in plot, including implausible plot events and timeline errors; character development, including the overall character arc; a central conflict that does not provide sufficient narrative drive, and so on.
In developmental editing, typically the editor shows where the problems are occurring and offers solutions, but does not do any of the actual rewriting.
A complete round of developmental editing generally consists of a thorough revision letter outlining the revision the author needs to do, plus line edits and comments (called editorial queries) on the ms itself to help guide the author through the revision.