Try this:
.modalBackground
{
background-color: Gray;
filter: alpha(opacity=80);
opacity: 0.8;
z-index: 10000;
}
and your panel
<asp:panel id="Panel1" runat="server" backcolor="#FAFAFA" height="400px" width="550px" style="display:none; margin-top:10px;" xmlns:asp="#unknown"></asp:panel>