It's easier to perform the update in Settings - General - Software Update on your iPad. Updating that way will need more storage space on your iDevice than the size of the update itself. As soon as the update has been installed, the storage space that isn't needed will be freed up again. An OTA (over the air) update will be installed "on top of" the existing software.
The update via iTunes works different. iTunes will remove the "old" software from your device, and install a fresh, new version. This will also need less space on your iPad than the other kind of update. So if there's not enough storage space for an update OTA on your device, use iTunes to get it up to date.
While an update OTA can be the reason for some glitches afterwards, an update via iTunes mostly won't be followed by problems with the iPad. That's also the reason why we recommend restoring/updating via iTunes, when an update OTA went wrong.
Hope that helps.