The UpdatePanel is part of System.Web.Extensions.dll
and does not need to be explicitly added to the bin folder of the project as it gets installed into the GAC (global assembly cache).
See the ASP.NET AJAX documentation for more information. The ASP.NET 2.0 AJAX Extensions 1.0 msi can be downloaded here.
(I'll leave the rest of the answer here as it may prove useful for someone else)
It sounds like the AJAX Control Toolkit is not referenced in the page. Make sure you have
using AjaxControlToolkit;
in the code-behind.
Also, you might want to add this to the web.config
<pages>
<controls>
<add tagPrefix="ajaxToolkit" namespace="AjaxControlToolkit" assembly="AjaxControlToolkit"/>
</controls>
</pages>
This specifies the tag prefix for the AJAX Control Toolkit controls when used in the aspx markup.