We describe the topological Hochschild homology of the periodic complex $K$-theory spectrum, $THH(KU)$, as a commutative $KU$-algebra: it is equivalent to $KU[K(\Z,3)]$ and to $F(\Sigma KU_\Q)$, where $F$ is the free commutative $KU$-algebra functor on a $KU$-module. Moreover, $F(\Sigma KU_\Q)\simeq KU \vee \Sigma KU_\Q$, a square-zero extension. In order to prove these results, we first establish that topological Hochschild homology commutes, as an algebra, with localization at an element. Then, we prove that $THH^n(KU)$, the $n$-fold iteration of $THH(KU)$, i.e. $T^n\otimes KU$, is equivalent to $KU[G]$ where $G$ is a certain product of integral Eilenberg-Mac Lane spaces, and to a free commutative $KU$-algebra on a rational $KU$-module. We prove that $S^n \otimes KU$ is equivalent to $KU[K(\Z,n+2)]$ and to $F(\Sigma^n KU_\Q)$. We describe the topological André-Quillen homology of $KU$ as $KU_\Q$.