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The classical B0.5e star γ Cassiopeia is known to be a unique X-ray source by virtue of its moderate LX (1033 ergs s-1), hard X-ray spectrum, and light curve punctuated by ubiquitous flares and slow undulations. The peculiarities of this star have led to a controversy concerning the origin of these emissions: whether they are from wind infall onto a putative degenerate companion, as in the case of normal Be/X-ray binaries, or from the Be star itself. Recently, much progress has been made to resolve this question: (1) the discovery that γ Cas is a moderately eccentric binary system (P = 203.59 days) with unknown secondary type, (2) the addition of RXTE observations at six epochs in 2000, adding to three others in 1996-1998, and (3) the collation of robotic telescope (Automated Photometric Telescope) B- and V-band photometric observations over four seasons that show a 3%, cyclical flux variation with cycle lengths of 55-93 days. We find that X-ray fluxes at all nine epochs show random variations with orbital phase, thereby contradicting the binary accretion model, which predicts a substantial modulation. However, these fluxes correlate well with the cyclical optical variations. In particular, the six flux measurements in 2000, which vary by a factor of 3, closely track the interpolated optical variations between the 2000 and 2001 observing seasons. The energy associated with the optical variations greatly exceeds the energy in the X-rays, so that the optical variability cannot simply be due to reprocessing of X-ray flux. However, the strong correlation between the two suggests that they are driven by a common mechanism. We propose that this mechanism is a cyclical magnetic dynamo excited by a Balbus-Hawley instability located within the inner part of the circumstellar disk. According to our model, variations in the field strength directly produce the changes in the magnetically related X-ray activity. Turbulence associated with the dynamo results in changes to the density (and therefore the emission measure) distribution within the disk and creates the observed optical variations.