One of the properties of the UpdatePanel is the RenderMode [Block|Inline]. Whether you choose block or inline depends on your user interface needs.
In order for the DHTML framework of the browser to properly find and update the content within the UpdatePanel, it must be rendered as something which can enclose content and have no UI of its own. The logical response to this need is either the <SPAN> or <DIV> tags; which the UpdatePanel can render itself as depending on whether you choose Inline or Block as the RenderMode, respectively. What's the difference? For those that aren't extremely familiar with the <SPAN> or <DIV> tags, it basically comes down to the <DIV> tag acting as more of a division or sub-region to a page, which means that it "blocks" in content (has actual dimensions and can block in content, indent paragraphs, etc.) and the <SPAN> tag is basically the <DIV> tag without this feature.
An example is at hand. The following HTML:
<b><div style="width:50px">
This is my sentence, this is my sentence
</div>
<span style="width:50px">
This is my sentence, this is my sentence
</span></b>
Renders itself as:
This is my sentence, this is my sentence
This is my sentence, this is my sentence
Within modern browsers (in other words, if yours doesn't display the first one indented, and the second one not indented, then get off Lynx).