We study, from first principles, structural, electronic, and bonding properties of liquid water. Our system is twice as large as that used in previous ab initio simulations and our computed structural properties are in good agreement with the most recent neutron scattering experiments. Moreover, the use of a novel technique, based on the generation of maximally localized Wannier functions, allowed us to describe the molecular charge distribution and the polarization effects in liquid water with a degree of accuracy not previously possible. We find that, in the liquid phase, the water molecule dipole moment has a broad distribution around an average value of about 3.0 D. This value is 60% higher than that of the gas phase and significantly larger than most previous estimates. A considerable increase is also observed in the magnitude of the average eigenvalues of the quadrupole moment tensor. We also find that the anisotropy of the electronic charge distribution of the water molecule is reduced in the liquid. The relevance of these results for current modeling of liquid water is discussed.