The first thing to establish is what kind of editor do you need?
Content editing takes a big picture look at your manuscript. This might also be called "developmental editing," referring to the fact that the focus here is on the improvement of the storytelling in your manuscript.
Content editors will read your manuscript and identify weaknesses in the overall material. Is the manuscript structured appropriately? Is the style clear? And does it carry through to the end? Is the author voice unique and consistent? How is the manuscript paced?
These are extremely important aspects for writing a solid manuscript, and if it's your first novel, hiring someone to make these kinds of observations may be a very good step for you. If you hire a reputable editor, you are going to get useful information from this kind of feedback, regardless of your experience level.
Even material that has been read in writers groups or has gone through a writing class or conference workshop, can still benefit from a one-on-one read-through and feedback from a professional. Writers groups are great, but they may not be "professional" quality readers. They may not be experts in your genre or they may have blinders about issues in your material if they have been a part of the creative process.
Further, even great readers/writers miss things, so a separate, impartial set of eyes can identify weaknesses you haven't yet identified. Lastly, a lot of freelance editors work closely with agents or publishers or published authors, and know what the latest trends are in the publishing industry, so they can also make observations based on real-world experience.
Copy editing, proofreading, and line-editing focus in on the specifics of grammar, punctuation, word choice, and spelling. They may also catch issues around consistency, such as character names changing from one part of the manuscript to another or a scene taking place outside suddenly being inside (you'd be amazed how easy it is to miss this kind of error).
The later kind of editing might be appropriate if your manuscript has been through several rewrites, been read by expert beta-readers (that friend of yours who happens to also teach creative writing at the local community college!) or isn't your first published manuscript.
For many of us, hiring first the one and then the other may be the best way to go.
Hiring an individual (or two!) to do this kind of work for you can be advisable whether you are querying agents or preparing to self-publish. The first, because agents may reject a manuscript at the get-go when there are clear copy-editing issues and will certainly reject a manuscript that has structural problems. The second, because a freelance editor may be all that stands between a self-published manuscript and the public, the final line of defense to demonstrating you are a top-notch writer.
Some editors do both kinds of editing, some do only one or the other. This has nothing to do with their ability. These are two different kinds of skills, so don't let it concern you if a freelance editor does only one type of editing, that's not necessarily a bad thing. It may mean you hire two different editors during these two phases of your writing process or one person two different times. No one is going to give you feedback on structural, pacing, and voice issues, while simultaneously looking for typos, the first dictates you WILL be doing a rewrite, so save the copy-editing cost for the final draft.
Once you know what kind of editing you need, how do you find a good freelance editor?
Writers conferences and writers organizations are great places to start. Many writers conferences include freelance editors on their panels, workshops, or critiques. Make appointments to see these individuals, pay the fee for them to critique your first 20 pages or so, then see what you think about their work. This is a great way to find out if they are a good fit for you. Listen to their panels, do you like how they approach working with writers? What kind of genres do they read? Which authors have they worked with?
There are lots of places to find writers conferences. Websites such as New Pages lists them around the world. You can also find them listed in magazines, such as Poets & Writers. Lastly, just google "Writers Conference" and your state, this can help you find the ones closest to you (or, google that location you've always wanted to visit… they do have writers conferences in Hawaii).
There are also Editor resources on the web, such as the Northwest Independent Editors Guild and the Editorial Freelancers Association. These websites allow freelance editors to list their contact information and services. Use these sites as a base for starting your search.
But do your homework! How long has the person been in business? Do they respond to you quickly and professionally? If they are local, can you meet with them in person?
All freelance editors should be willing to give you a contract, with fees and deadlines spelled out. Many will send you a sample feedback document to show you the type of information you can anticipate receiving from them. Fees can vary greatly depending on the expertise of the individual, so that isn't always proof of a person's abilities, but they should have a website and email address. You should also be able to find information about them on the Internet. Are they regular speakers at writers conferences? Do they teach at colleges or universities? Do they have degrees appropriate for their field? (for example, a B.A. or M.A. in English?) Does their work history show experience in the field? If they state on their website they worked for Random House as an editor for ten years, you will be able to find proof of that on the Internet. If you google their name, does it show up connected to the conferences, workshops, and companies they claim to work with? And if they list authors on their website - can you find their names in the "Thank you" section in those writers' books?
You don't have to hire a private investigator or track down every author they claim to have worked with, but a little time doing a search on the Internet should help you determine if a person has legitimate credentials.
Then, go with your instincts. If you don't click with an editor while communicating about costs/deadlines, it's unlikely to get better with their actual feedback. There are others out there, keep looking.
Keep in mind, however, good editors often have to schedule weeks or even months in advance, so start researching when you're close to wanting to hire someone, and find the person you want to work with, then schedule their time when you are absolutely sure your work is ready for the expense of having a professional critique your material.