What is the mechanism for when the fed purchases a gov't or corporate bond from a non bank? My understanding is when the fed buys a bond from a bank they use bank reserves (bank reserves are swapped for a bond). How does the transaction differ when a non bank (ex hedge fund) is involved?
When the Fed buys a bond as part of a Quantitative easing program, they execute with Primary Dealers through a website interface.  Hedge funds do not execute directly with the Fed, although they could execute with a Primary dealer who executes with the Fed.
When the Fed executes with a primary dealer, it credits the account of the primary dealer using newly created funds.  The dealer deposits the fund in a bank account, which increases bank reserves in the system.