We theoretically study measurement induced-dephasing of a superconducting qubit in the circuit QED architecture and compare the results to those obtained experimentally by Schuster {\it et al.}, [Phys. Rev. Lett. 94, 123602 (2005)]. Strong coupling of the qubit to the resonator leads to a significant ac-Stark shift of the qubit transition frequency. As a result, quantum fluctuations in the photon number populating the resonator cause dephasing of the qubit. We find good agreement between the predicted line shape of the qubit spectrum and the experimental results. Furthermore, in the strong dispersive limit, where the Stark shift per photon is large compared to the cavity decay rate and the qubit linewidth, we predict that the qubit spectrum will be split into multiple peaks, with each peak corresponding to a different number of photons in the cavity. ; Comment: 15 pages and 10 figures. Section IV revised. Author and references added. Version with high resolution figures available at available at http://www.physique.usherbrooke.ca/~ablais/publications.htm