I beta-read for other people. I generally get the whole book at once, when the author thinks it's done-ish - i.e., the author has already sorted out any problems they know about - there's no point giving your stuff to beta-readers before you've fixed known problems, because it's a waste of everyone's time. The job of the beta-reader is to look at the whole thing from a reader's perspective: does the story work? Are there plot holes? Is it boring? Does the middle sag? Do you abandon essential tasks to keep on reading, or does it drag? Do you want every single character in it to die in a fire? Do you want to die in a fire, or in any other way, to avoid having to read one more awful, miserable, soul-sucking page?
Essentially, your beta-reader is your canary in the literary goldmine. However much you try, you are almost certainly too close to your book to see where the problems are, so your beta-readers do that for you, by telling you privately what would otherwise come out in reviews. Personally, I think it's actually probably better if they're not authors - that way, you get the 'authentic' reader experience. Even though someone who isn't an author/editor might not be able to say why something doesn't work for them, you need to know that, for Joe Reader, it doesn't hit the spot. Then it's your job, as the literary expert, to fix it.
Different authors approach it in different ways. One author sends a questionnaire to fill in, which I dutifully do (plus extempore comments). Other authors just want freeform feedback. I tend to annotate as I go - that way, the author has a running stream-of-consciousness record of what the reader is thinking during the reading - rather than at the end when everything is known.
Yeah, and please edit for spelling and grammar before handing it over. I hate having to mark every error as I go.
