You do not have iOS 5 on your iPad so you have to update by using a computer via the latest version of iTunes. You can connect the iPad to your computer and launch iTunes. Select the iPad on the left side under the devices heading. Click on the Summary Tab on the right. Click on Check for Update.
Yoy can only update to iOS 6 now.
After you update to iOS 6 or later, you will have Software Update in you settings and can update via WiFi OTA.
How to update to iOS 5 or later.
iOS 5: Updating your device to iOS 5 or Later
How to install iOS 6
iOS: How to update your iPhone, iPad, or iPod touch
If you are currently running an iOS lower than 5.0, connect to your computer & click on the "Update your device using iTunes".
Tip - You may need to disable your firewall and anitvirus software temporarily. Then download and install the iOS update. Be sure and backup your iPad before the iOS update. After you update to iOS 6.x, the next update can be installed via wifi (i.e., not connected to your computer).