Inspection of equipment is just that, a visual check first regarding the environment and situation of the appliance, then for obvious problems/defects such as:

Cables located so as to avoid damage
Means of disconnection/isolation readily accessible
Adequate equipment ventilation
Equipment positioned to avoid strain on cord
Indiscriminate use of multi-way adaptors and trailing
    sockets is avoided
No unprotected cables run under carpets
Damage to flexes, or to equipment
Flexes pulling away from plugs, or showing signs of
    unauthorised repair
Signs of overheating (e.g. burn marks or discolouration),
    cracked plugs

Then opening of the plug cover will enable further checks to be made:

Is the fuse the correct one
Are the terminals correctly wired and secured.

When conducted as a formal visual inspection, the details should be recorded as they form part of the companies Health & Safety history.
Testing involves the use of a device to check the electrical integrity of the equipment. This can highlight faults such as loss of earth integrity or insulation failure that cannot be determined by visual inspection alone.
Electrical testing of portable equipment will involve the following:

Earth bond continuity tests
Insulation resistance testing
Functional checks