I'd call it "working hands on", although I like JB King's word - "Job Shadowing" or even just "shadowing".
How this happens is going to be industry and situation dependent.
If I were telling someone else about this I'd clarify it this way:
"Shadowing" - connotes temporarily doing or observing the job of someone else - be it a subordinate or a peer. It can be in preparation for a move, or just to learn more. The big implication, though, is that two people are essentially doing the same thing as if they are one person. So it's not working side-by-side, it's literally doing the same thing. Think of the times when a waitress is training a new person - the two wait exactly the same tables - one is doing, one is observing. Productivity is the same as if only one person were doing this job.
"Working hands on" - implies doing individual contributor work. When a manager is working hands on, they are typically doing the same thing that a subordinate might do. Most likely independently and hopefully competently. Not always for the purpose of learning - many just like to keep their skills up.
Sounds like you're really talking about Shadowing. I'd say the best practices are along the lines of:
The degree of hands on participation (vs. observation) - needs to fit the needs of the project - in cases where there's a high risk, the person with the adequate training needs to do it. That can be anything from "let's let the guy with the safety certification handle the plutonium", to "if customers think the manager is the person to talk to, the employee will never be able to do his job effectively again"
Impact - it's important to judge the negative impact of any observation - will it slow the work down? How much? What isn't getting done while the manager is doing this? What will happen if an unskilled/inexperienced person does this work?
Preparation - I'd say for sure, the manager should know any regulations as well as the employee does before he tries to do the same job.