The Settings > General > Software Update option only appears when you have iOS 5+ installed, if you have iOS 4 then you will need to do the update via your computer's iTunes.
Connect the iPad to your computer's iTunes and copy any purchases off the iPad to your computer via File > Transfer Purchases (File > Devices > Transfer Purchases on iTunes 11). You may also want to copy photos and any important documents off the iPad as well e.g. via the file sharing section at the bottom of the device's apps tab when connected to iTunes, via wifi, email, dropbox etc - they should be included in the backup, but it's best to have a copy of them outside of the backup just in case. You can then force a backup of the iPad by right-clicking the iPad 'Device' on the left-hand side of iTunes and selecting 'Backup'.
Then start the update by selecting the iPad on the left-hand side of iTunes (on iTunes 11 you can enable the left-hand sidebar via option-command-S on a Mac, control-S on a PC), and on the Summary tab on the right-hand side clicking the Check For Updates button
Updating to iOS 5+ : http://support.apple.com/kb/HT4972
An iPad 1 will update to iOS 5.1.1, an iPad 2 and 3 to iOS 6.0.1
If you have an iPad 1, the max iOS is 5.1.1. For newer iPads, the current iOS is 6.0.1. For the iPad Mini the iOS is 6.0.2. The Settings>General>Software Update only appears if you have iOS 5.0 or higher currently installed.
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 the iPad to the computer, open iTunes. Then select the iPad under the Devices heading on the left, click on the Summary tab and then click on Check for Update.
Tip - If connected to your computer, 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 an iPad (except iPad 1) to iOS 6.x, the next update can be installed via wifi (i.e., not connected to your computer).