We present sub-arcsecond (FWHM <0.''7) R, J, H, K, and L' images of the bright IRAS galaxy VV 114 obtained on the Canada-France-Hawaii Telescope and the NASA Infrared Telescope Facility. These observations have unveiled two very strong infrared (IR) sources (VV 114 East) located similar to 15'' east of the main optical nucleus (VV 114 West). These two sources, separated by 1.''6 and spatially resolved at 2.2 mu m, are much brighter in the infrared than the optical peak is. We have also secured medium resolution (lambda/Delta lambda = 330) K-window spectra of both regions of VV 114 using the long-slit, cooled grating spectrometer CGS4 on the United Kingdom Infrared Telescope. While the strongest activity is found in W 114 East, both W 114 West and VV 114 East show strong recombination lines of hydrogen and helium, several transitions of molecular hydrogen, and relatively deep CO bands at 2.3 mu m. These spectral features are signatures of vigorous star formation activity. The H-2 spectra show evidence of UV fluorescence excitation. From the spatial extent of Bry in VV 114 East, we infer that this region has a population of 4 x 10(5) O8V stars. Such a cluster of early-type stars can account for more than half the IRAS luminosity. We fit the spectral energy distributions (SEDs) of the newly discovered IR sources with a simple three-component model. Based on observed RJHKL' colors and the strength of the 2.3 mu m CO band, this model can determine the absolute extinction at 2.2 mu m and the fraction of the K continuum contributed by hot dust and nebular emission. We find that both IR sources in VV 114 East suffer from an extinction A(K) of similar to 0.4 mag. In the strongest of the two IR sources, emission from hot dust contributes more than 55% of the K continuum, nebular emission contributes 5%, and late-type red supergiant stars make up the remainder. The JHK colors of VV 114 West strongly suggest that a large fraction of the structure seen in this region is due to the presence of numerous H II regions. We make crude measurements of the rotation curves of the systems using several emission lines. The velocity gradient observed in W 114 East implies a mass enclosed within r < 1.1 kpc of 9 x 10(9) M., which is similar to the mass distribution of our Galaxy within the same radius. A similar velocity gradient is inferred for VV 114 West. Our infrared images and spectroscopic observations provide a self-consistent picture of VV 114 as an interacting system involving a merger and another galaxy of approximately equal mass, in which vigorous starburst activity is taking place. There is no evidence for active galactic nuclei in VV 114.