You can now optionally [...] intercept any error message sent back from the server, and perform custom client-side actions as a result [...]. (source)

Well, I disagree with “optionally”. As far as I understand, if you don’t explicitly intercept the error/exception sent back from the server from within an UpdatePanel, your user will get an unfriendly javascript error like this:

So what can you do to fix this? Easy, just add this piece of Javascript code to your Masterpage (or to any page if you don’t have/use a Masterpage):

<%-- This script must be placed after the form declaration (i.e. <form id="form1" runat="server">) --%>
<script type="text/javascript">
    Sys.Application.add_load(AppLoad);

    function AppLoad() {
        Sys.WebForms.PageRequestManager.getInstance().add_endRequest(EndRequest);
    }

    function EndRequest(sender, args) {
        // Check to see if there's an error on this request.
        if (args.get_error() != undefined) {

            var msg = args.get_error().message.replace("Sys.WebForms.PageRequestManagerServerErrorException: ", "");

            // Show the custom error.
            // Here you can be creative and do whatever you want
            // with the exception (i.e. call a modalpopup and show
            // a nicer error window). I will simply use 'alert'
            alert(msg);

            // Let the framework know that the error is handled,
            //  so it doesn't throw the JavaScript alert.
            args.set_errorHandled(true);
        }
    }
</script>

Now you should get error messages like this (javascript alert):

This is exactly how exceptions used to be displayed when thrown inside an UpdatePanel before .NET 3.5.

Note: I do understand the benefits of a the new approach. It gives you flexibility to present the error message any way you want, before your hands where quite tied to this simple Javascript alert window.

As a matter of fact, I’ve implemented a nice ModalPopup and have ensure that only user-friendly messages are actually shown: only messages of a certain type (i.e. UIMessageException) are forwarded to the user without any cleanup/transformation.

References:

• Exception handling best practices in ASP.NET web applications
• How Do I: Customize Error Handling for the ASP.NET AJAX UpdatePanel
• MVP blog: UpdatePanel: having fun with errors
• MSDN post (be careful, not 100% correct): Customizing Error Handling for ASP.NET UpdatePanel Controls

Cheers!