How does that work out in practice? Panasonic owns the machines, do they employee and manage their own set of workers in the Tesla factory in Reno? and then Tesla pays Panasonic who pays them, even though they're working right alongside the Tesla employees? How distinct is it, really, when they're in the same factory working side by side?

I would imagine this is most likely a shop in shop scenario, which is rather common in the automotive industry.

Basically, a specialized vendor for a given component is setting up their own production/assembly in your facilities - in some instances even along your assembly line.

The workers operating these machines are usually trained and employed by the supplier.

This setup does have some benefits, like less potential for supply chain disruptions as well as guaranteed capacity. But it is extremely personell intensive and generally requires enormous upfront investments.