UpdatePanels came out fairly early in the AJAX cycle, and they're heavy (they can emit around 100-300k of JavaScript). Behind the scenes, UpdatePanels post the entire page back to the server via a JavaScript XMLHttpRequest. The new page is generated with the normal page lifecycle just like a postback, but only the parts that live inside the UpdatePanel (plus the parts necessary for updating ViewState and so on) are sent back to the client. From there, the markup is inserted without a visible flash or interruption of page state.
Most competing AJAX tools lean towards super lightweight implementations that let you ship or generate a small chunk of HTML via Javascript, and I would say that's the dominant direction today, especially outside the ASP.NET world.
The difference in total amount of data sent across the wire is huge -- see the link below. In low-traffic situations it might not make a bit of difference, but in the case of a site like StackOverflow, it would show up on the bandwidth bill for sure.
All that said, I don't think it's fair to say that UpdatePanels are not actually AJAX, since they do ship HTML around via asynch JavaScript -- it's just that there's a gigantic, often cumbersome framework on top. UpdatePanels get a bad rap sometimes, but they provide a brilliantly simple developer experience. I've often found them useful in low-traffic situations.
Update: Here is an article (old but still valid) that examines the payload UpdatePanels ship to and from the server. It also goes into Page Methods, which is a lightweight, Web Service-based alternative to UpdatePanels. This is an oft-overlooked part of Microsoft AJAX.