We present contemporaneous optical and infrared (IR) photometric observatio
ns of the Type IIn SN 1998S covering the period between 11 and 146 d after
discovery. The IR data constitute the first ever IR light curves of a Type
IIn supernova. We use blackbody and spline fits to the photometry to examin
e the luminosity evolution. During the first 2-3 months, the luminosity is
dominated by the release of shock-deposited energy in the ejecta. After sim
ilar to 100 d the luminosity is powered mostly by the deposition of radioac
tive decay energy from 0.15 +/-0.05 M-. of Ni-56 which was produced in the
explosion. We also report the discovery of an astonishingly high IR excess,
K-L'=2.5, that was present at day 130. We interpret this as being due to t
hermal emission from dust grains in the vicinity of the supernova. We argue
that to produce such a high IR luminosity so soon after the explosion, the
dust must be pre-existing and so is located in the circumstellar medium of
the progenitor. The dust could be heated either by the UV/optical flash (I
R echo) or by the X-rays from the interaction of the ejecta with the circum
stellar material.