I came across two similar instances of occupy that I don't really understand.
The large industrial population of the town is occupied in the manufacture of lace, which extended hither from Nottingham; there are also railway carriage works. (Your Dictionary Sentence)
a person or thing occupied in or designed for splitting something. (Google's definition of "splitter")
It seems occupied in both sentences mean employed, but I can't find any dictionaries that support this (checked MW and ODO). The closest usage I could find is to hold a position or a job, which is not the same. Intuitively, it would make sense that occupy could have usages related to occupation. But why can't I find it in the dictionaries?