High-quality phase-resolved optical spectropolarimetry is presented for the magnetic cataclysmic variable V884 Her. The overall circular polarization during active accretion states is low and only slightly variable in the range 5000-8000 Å. However, the polarization is highly structured with wavelength, showing very broad polarization humps, narrow features that are associated with weak absorption lines in the total spectral flux, and sharp reversals across each major emission line. The polarization reversals arise from Zeeman splitting in the funnel gas in a longitudinal magnetic field B ~ 30 kG. The set of narrow, polarized absorption features matches the Zeeman pattern of hydrogen for a nearly uniform magnetic field of B = 150 MG, indicating that the features are "halo" absorption lines formed in a relatively cool reversing layer above the shock. With this identification, the broad polarization humps centered near 7150 Å and below 4000 Å are assigned to cyclotron emission from the fundamental and first harmonic (n = 2), respectively. V884 Her is only the second AM Her system known with a field exceeding 100 MG and the first case in which the cyclotron fundamental has been directly observed from a magnetic white dwarf.