Literary Criticism and Literary Theory are phrases that have been used interchangeably. But there is a technical difference between the two. Literary Criticism refers to the evaluation of a work. The term "criticism" suggests that the critic is making judgments about how "good" the literary text is. If a novel adheres to the critic's standards in terms of form, content, etc., he/she will judge it to be a good work of literature. Literary Theory is more about how the reader understands literature. The theorist might be interested in the text's function, the historical background of the author, or the hidden meanings in the text. A Feminist theorist will have a different approach than a theorist with a New Critical lens. Theory allows the reader and/or theorist to investigate and evaluate literature from many different angles.
This is where the two (theory and criticism) overlap. For example, if a theorist investigates a novel and determines that it is much more nuanced, with more hidden meanings and clever satiric comments about societal roles, then that theorist might judge the novel to be a more ingenious work than was previously supposed. In this case, the reader can use theory to better understand the work and be in a better position to criticize or judge the work.
Because theory has become so prevalent in literary studies, theoretical concerns often accompany a critical evaluation. And in that sense, one is doing theory and criticism and the two are necessarily linked. In order to be a good critic, I may need to understand different theoretical interpretations of the literary work. For this reason, many modern critics use theory in evaluating a literary work, and you will find that the terms "criticism" and "theory" are often used interchangeably.