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.
After you update to iOS 5 or later, you will have Software Update in you settings and can update via WiFi OTA.
How to update to iOS 5 or later.