Update it from iTunes on a computer as described at the bottom of this article; devices running an iOS version prior to 5.0 can't be updated straight from the device. It will be updated to the newest iOS release supported by the device’s hardware.
If you have an iPad 1, the max iOS is 5.1.1. For newer iPads, the current iOS is 6.1.3. 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).
Tip 2 - If you're updating via wifi, place your iPad close to your router to preclude getting a corrupted download.
It sounds like you are still on iOS 4. In order to update your iPad 2 OTA, you must have iOS 5 or later. So first you will need to use iTunes via cable to update your iPad. See the following article on how to use iTunes to update from iOS 4:
iOS 4: Updating your device to iOS 5 or later
Once you have iOS 5 or later on your iPad, you will see Software Update under settings and will be able to do future updates OTA.
Hope this answers your question!